Sitting of 4 March 1985

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

    Teachers (Pay Dispute)
    Mr. Raffanasked the Secretary of State for Wales if he will make a statement regarding the latest position on the teachers' pay claim and the effect of industrial action by particular teachers' unions on pupils' education in Wales.
    Mr. Gristasked the Secretary of State for Wales what proposals his Department has to protect pupils' interests during any industrial action taken by teaching unions.
    The Minister of State, Welsh Office (Mr. John Stradling Thomas): Teachers' pay and conditions of service in England and Wales are the responsibility of my right hon. Friend the Secretary of State for Education and Science. So far, industrial action in Wales has been limited to the half day strike last Tuesday by members of the National Association of Schoolmasters/Union of Women Teachers. I deplore this action because it can only interfere with the preparation of pupils for this summer's public examinations; but it is of course for the local education authorities to do what they can to minimise the effects of the dispute on pupils.
    Mr. Raffan: Does my hon. Friend agree that by taking strike action teachers harm the education of children and their professional status? Does he further agree that teachers can enhance their status only by accepting a much closer link between performance and pay?
    Mr. Stradling Thomas: My hon. Friend has put his finger on two important points. First, I have always been taught by educationists that the finest method of teaching is by precept. By taking this action, teachers are setting a very bad example. Secondly, teachers have gone in for disruption although, as my right hon. Friend the Prime Minister said last week, their pay has kept pace with inflation since 1979.
    Mr. Grist: Does my hon. Friend agree that, although most teachers give sterling service to the pupils in their charge, they might have learnt from a recent example that blind loyalty to the leaders of their unions will repay them ill?
    Mr. Stradling Thomas: Underlying the strike is the fear of the possibility of assessment. There are few
    638
    professions or other occupations in which continuous assessment of performance is not inherent. That is especially true of Members of Parliament.
    Mr. Rowlands: After the miners, do the Government now consider that the teachers of Wales are the enemy within?
    Mr. Stradling Thomas: Most certainly not. Most teachers in Britain, especially in Wales, give excellent service and are vital to our future.
    Mr. D. E. Thomas: Will the Minister assure the House that, if the teaching dispute lasts one year, the Government will not spend the first six months telling the House and the country that they have nothing to do with it and the second six months actively trying to prevent negotiations?
    Mr. Stradling Thomas: I do not accept the basic premise of the hon. Gentleman's question. My answer to both parts of his question is no, Sir.
    Mr. Ron Davies: Does the Minister agree that the Government's action in response to the teachers' dispute has been set by the policies that they followed in respect of the miners' dispute? How else can we explain the Government giving misleading statements, misleading teachers' unions about their intentions and doing nothing other than sowing bitterness and confusion in the minds of teachers?
    Mr. Stradling Thomas: I do not accept the premise of the hon. Gentleman's question. The Government have been clear about this. There is an offer on the table. It is not the Government or the management who have misled teachers in this case; it is the leaders of the teachers' union which has done so. If the teachers pursue their claim as they are doing at present, it can only mean fewer teachers or fewer resources for other vital educational matters.
    Mr. Terlezki: Does my hon. Friend agree that there are no winners, only losers, in this strike, and that the losers are the children? Surely one cannot expect a 12 per cent. increase in salary when inflation is running at only 5 per cent. a year.
    Mr. Stradling Thomas: I completely agree with my hon. Friend. I wish that the teachers, who are responsible and well-educated people, would bring this point home to the leaders of their union. The union leaders are not acting in the best way for the union members or for the children, who are the really important people in this matter.
    Dr. Roger Thomas: Does the Minister agree that if we are to continue attracting to the profession people of talent and dedication who have spent four years at university to qualify it is time that they were paid better than unqualified and untrained office staff?
    Mr. Stradling Thomas: I believe it is well known to most hon. Members that there is an offer on the table for the restructuring of salaries which would lead to that highly desirable result. It would be much better if teachers, instead of going for disruptive action, returned to negotiation and sorted out that aspect in order to improve the quality of education. That aim is at the heart of the Government's policies.

    General Practitioners
    Mr. Hubbard-Milesasked the Secretary of State for Wales what was the number of general practitioners practising in Wales in 1978–79 and at the latest date for which figures are available.
    Mr. Bestasked the Secretary of State for Wales what has been the increase in the number of general practitioners in Wales since 1979.
    The Parliamentary Under-Secretary of State for Wales (Mr. Wyn Roberts): At October 1978, including trainees and assistants, there were 1,418 general medical practitioners practising in Wales. The corresponding figure for October 1979 was 1,448 and for October 1983, the latest date for which figures are available, 1,620.
    Mr. Hubbard-Miles: I am grateful to my hon. Friend for that answer, which once again clearly demonstrates the improvement in health care in Wales. How has the doctor-patient ratio been affected by the increase in numbers?
    Mr. Roberts: I am glad to hear my hon. Friend's observation that those figures show our concern to continue improving primary health care in Wales. The average doctor's list is 1,975 patients. This compares with 2,148 patients per doctor in 1978.
    Mr. Best: Is my hon. Friend aware that many general practitioners regard this Government as the most successful for a long time in the provision of health care? [Interruption.] This year £9 million is being allocated to major hospital developments. My right hon. Friend the Secretary of State has also taken an initiative with regard to renal dialysis in Bangor, Swansea and Carmarthen. [Interruption.] The Department is examining provisions to help cancer sufferers in North Wales, which I welcome, and to expand the bone marrow transplantation unit. A major initiative has been taken to examine the incidence of heart disease in Wales. These matters should surely be acknowledged by everyone.
    Mr. Roberts: In spite of all the jeering from the Opposition, my hon. Friend is absolutely right in saying that the NHS in Wales is advancing on all fronts. Recurring revenue resources have been increased by 10 per cent. between 1979–80 and 1983–84. There has been a further increase of 2·7 per cent. in 1984–85, and there will be a further 3 per cent. increase next year.
    Mr. Wigley: Is the Under-Secretary of State aware that the NHS is advancing backwards on one front — the limited list of drugs? The overwhelming majority of GPs in Wales have strongly protested about the Government's actions. Is the hon. Gentleman aware that, because of the Government's initiative, thousands of disabled people and pensioners are worried that they will not be able to obtain the drugs that they need for their conditions? Will the hon. Gentleman give an undertaking that, since he has responsibility for this matter in Wales, he will think again about the Government's actions?
    Mr. Roberts: The hon. Gentleman should be aware that only some one third of prescriptions are paid for. The remaining two thirds are free. With regard to the limited list, the list of some 30 drugs submitted for consultation resulted in a number of representations from GPs and patients in Wales, and we are grateful for them. As a
    640
    result, the Government have published a new list of some 100 drugs, and we are convinced that they will be adequate to meet all clinical needs.
    Sir Raymond Gower: Do not those figures reflect the fact that, whatever other items of Government expenditure have been affected by necessary changes, a high priority has been given to health services throughout the term of this Government and their Conservative predecessors? Does that not make nonsense of the untrue propaganda to the contrary?
    Mr. Roberts: My hon. Friend is right. It is high time that the Opposition acknowledged the advances that have been made in the National Health Service in Wales instead of adopting the cribbing attitude that they have to date.
    Dr. Roger Thomas: Will the Minister turn his attention to unemployment among junior doctors; in particular those who have spent four years after qualification being trained for general practice? Those people, on qualifying, have to apply for about 50 or 60 places before they are successful. It is practically impossible for doctors who have qualified overseas to obtain posts. There we have a case of racial discrimination of the first order.
    Mr. Roberts: I do not agree with the hon. Gentleman. He is aware of the contribution to the National Health Service by doctors from abroad. All hon. Members will be ready to acknowledge that. Unemployment is, of course, a matter that junior doctors encounter in the process of obtaining the jobs that they want.

    Cynon Valley
    Mrs. Clwydasked the Secretary of State for Wales if he will make additional resources available to Cynon Valley district council to enable it to take steps to reduce unemployment and further improve housing conditions within its area.
    The Secretary of State for Wales (Mr. Nicholas Edwards): I note that, as in the Welsh day debate on Thursday, there are more Welsh Conservative Members than Welsh Labour Members in the House for questions today. The answer to the hon. Lady is no. The Cynon Valley district council already has substantial resources available to it. In determining its capital allocations, full account was taken of housing conditions in the Cynon Valley. The Aberdare travel-to-work area is in the upper tier for regional industrial assistance, and the area can draw upon the resources of economic development bodies such as the Welsh Development Agency and NCB (Enterprise) Ltd.
    Mr. Rogers rose—
    Mr. Speaker: Order. I shall pre-empt the point of order which I believe is coming.
    Mr. Rogers: I was not seeking to raise one, Mr. Speaker.
    Mrs. Clwyd: That was a completely inadequate response to the position in the Cynon Valley. The Minister is clearly still unaware that 48 per cent. of private housing is unfit for human habitation and that we have the highest unemployment rate among males in Wales. His answer will be regarded as completely unacceptable and politically vindictive and motivated. Does he realise that

    641
    at the present level of funding to areas such as Cynon Valley it will take over 50 years to restore housing to the adequate conditions in which people can live?
    Mr. Edwards: If what the hon. Lady says about conditions is correct—the Government vastly increased resources available for improvement of the housing stock in Wales—it is surprising that during the past three or four years the Cynon Valley authority has not used the resources available to it, has not declared any housing action areas, has not taken advantage of low-cost home ownership schemes, and has not taken full advantage of the variety of new initiatives that can be taken, such as enveloping, to improve the housing conditions for those for whom it is responsible.
    Mr. Grist: Does my right hon. Friend agree that the greatest damage to the Cynon Valley, which has drained more money from its inhabitants and resulted in a greater threat to employment there, has been done by the miners' strike? Does he accept that those who, disgracefully, have tried to lead it in the locality have done more damage to the constituents than almost anything else could have done?
    Mr. Edwards: I agree with my hon. Friend. Indeed, the greatest contribution that could now be made to that area would be for everyone involved to get together to restore the health of that industry, to take advantage of the record resources which the Government are making available to the industry, and to seek to restore the markets upon which that industry depends.
    Mr. Allan Rogers: This is not a point of order, Mr. Speaker. I am sorry to have caused confusion. In respect of the Secretary of State's preamble to his answer, does he not realise and accept that the reason why, on occasions, people do not come along to Welsh days is his utterly awful and crushingly boring speeches?
    Mr. Speaker: That was almost a point of order. I was going to say that even Ministers should stick to the question.
    Mr. Barry Jones: The Secretary of State is giving very inadequate and evasive answers. Will he begin a fresh, meticulous survey of housing conditions in Wales, because the Cynon Valley problems exist throughout the length and breadth of the Principality? Does the right hon. Gentleman accept that the people of Cynon Valley and other deprived communities could have decent housing if we could take the 18,000 unemployed building workers off the dole queues and set them to work building decent houses for people in Cynon Valley and other parts of Wales?
    Mr. Edwards: A Welsh housing survey is coming up in 1986. If the hon. Gentleman's wishes for the Cynon Valley are to be realised, it will require the local authority to make full use of the resources and schemes that are available.

    Private Nursing Homes
    Mr. Ron Daviesasked the Secretary of State for Wales what is his estimate of the number of private nursing homes in Wales; and what is his estimate of the percentage of total health care in Wales provided by this sector.
    Mr. Wyn Roberts: At 31 December 1983, the latest date for which information is available, there were 50
    642
    private nursing homes in Wales. They provided 1,414 beds in the private sector, and that compared with the average daily available beds in the NHS at the time of 22,474, of which 49 were authorised for private use.
    Mr. Davies: Is the Minister satisfied with the standard of provision in those private homes and with the level of monitoring? May I refer him particularly to Highmead residential home, run by the Care agency in Cardiff? Is the hon. Gentleman aware that in that home residents are expected to pay £175 per week three months in advance? Is the hon. Gentleman further aware that pay cheques for staff employed by that home have bounced and staff have had to wait up to three months to receive their pay? Is the Minister further aware that in that home auxiliaries are carrying out the functions which should be carried out by properly trained and qualified staff? Finally is the hon. Gentleman aware that residents in that home have complained that they have not received enough to eat? Is that the standard of provision that the Minister wants? If it is not, what will he do about it?
    Mr. Roberts: The hon. Gentleman should know that private nursing homes must be registered under the Registered Homes Act 1984, and that it is up to the local health authority to inspect the premises and see that all is well. It must do so at least twice every 12 months. With regard to the nursing home that the hon. Gentleman mentioned, I shall certainly ensure that that case is looked into.
    Sir Anthony Meyer: Is my hon. Friend aware that the new code of practice raising standards in those homes—in itself, very welcome — accompanied by the revised scale of payments which the Department of Health and Social Security is prepared to make to cover the costs in those homes — which is also desirable, in itself — are none the less putting a squeeze on those homes, many of which may be forced to go out of business and to throw their occupants on to the resources of the local authority?
    Mr. Roberts: It is certainly the case that registration is not automatic. In view of the valuable contribution that those private nursing homes make to health care, it is absolutely essential that they should be of the highest standard. I understand the point made by my hon. Friend, but in general we would be extremely sad to lose any private homes, because of the value of their contribution.
    Dr. Roger Thomas: To what extent does the Minister feel that the mushrooming of small private nursing homes, which are often overseen by untrained people, is alleviating the average waiting time for admission into the numerically stagnant places in local authority homes for the elderly, which are fast becoming mini-geriatric hospitals?
    Mr. Roberts: I should have thought that the hon. Gentleman, especially in view of his experience of medical practice, would welcome the fact that private nursing homes help to reduce the waiting list for National Health Service hospitals. Surely that is to be welcomed. Furthermore, patients and doctors have the right to choose private treatment. Far from harming the NHS, the main effects are additions to the country's health care resources and reduced pressure on the NHS.

    Gwynedd
    Mr. Wigleyasked the Secretary of State for Wales what initiatives have been taken by his Department recently to improve the prospects of securing new job opportunities for Gwynedd.
    Mr. Nicholas Edwards: The county continues to benefit from Government policies and programmes, including road construction, factory building, urban programme and European Community schemes, and from the work of the agencies within Wales. Regional industrial assistance continues to be available for much of the county.
    Mr. Wigley: Will the Secretary of State acknowledge that he and his Department deliberately and specifically misled local authorities in Wales when he told the areas which were downgraded from development area to ordinary assisted area status and eligible only for selective financial assistance, that they would continue to benefit from regional policy? Will he now recognise that selective financial assistance is in no way regional policy, and that if a factory in Birmingham is willing to do work that would otherwise come to Wales, the work will go to Birmingham rather than to Wales?
    Mr. Edwards: I do not acknowledge anything of the sort. That is pure invention.
    Mr. Best: Is my right hon. Friend aware that only this morning I was in contact with his Department regarding the negotiation of a European Investment Bank loan for a garment manufacturing company, which will come to Holyhead and provide 300 jobs in the near future?
    Mr. Edwards: Yes, Sir. I am also aware that there are a considerable number of selective assistance applications for Gwynedd and if they are turned down it will be for very good reasons, as in other parts of the country. They are turned down either on grounds of viability or because there is a surplus of capacity. It cannot make sense to put money into a project in one part of the country if that will destroy jobs in another part.
    Mr. D. E. Thomas: When will the Minister be able to make a statement about the regional development boundaries as they apply to the borough of Aberconwy? Previously, I raised with him the question of differentials between the two parts of that borough since the recent changes. Will he now make a statement on the subject?
    Mr. Edwards: I have no information to give the hon. Gentleman about the actual boundaries, which, as he knows, relate to travel-to-work areas. We are examining whether, in terms of qualification for European assistance, we can make any measures such as we did in mid-Wales following the last changes.
    Mr. Barry Jones: Does the right hon. Gentleman know that there are only 500 vacancies for 15,500 jobless people in Gwynedd? Is he aware that in Holyhead one man in four is jobless? Will he tell us of any detailed plans that he has to bring work to this stricken county? Does he agree that Bangor, Caernarvon, Pwllheli and Holyhead are black spots by any definition?
    Mr. Edwards: As the hon. Gentleman knows, we are carrying out a major road building project on the A55, which is probably the largest single contribution that can be made to that county. It is one of the largest road
    644
    building projects in the country. The Gwynedd area has benefited from £200 million since 1979 on major infrastructure programmes. A major factory building programme is still being undertaken by the Welsh Development Agency, there is the urban programme, and European community assistance is also available.
    Mr. Wigley: On a point of Order, Mr. Speaker. In view of the wholly misleading and insubstantial response, I beg to give notice—
    Mr. Speaker: Order. The hon. Members may not say that the response was misleading. He may believe that it is incorrect.

    Hospitals (Radioactive Waste)
    Mr. Gareth Wardellasked the Secretary of State for Wales how many of the hospitals in Wales which discharge radioactive waste use Amberlite IRA 410 resin to remove radioiodine before discharge.
    Mr. Wyn Roberts: Information on the usage of Amberlite is not held centrally, but I understand that IRA 410 resin is not generally used in Welsh hospitals.
    Mr. Wardell: Does the Minister accept that a clean environment free from artificial radioactivity is desirable and that this is especially so in an area such as Bracelet Bay, in my constituency, which is frequently used for recreation, but which is very close to the discharge of radioactivity from Singleton hospital? Because of the untreated nature of this radioactive waste and the possibility of insufficient mixing, as well as the concentration of that waste in both organic and inorganic materials, will he arrange for a special survey into whether it is possible to have concentrated and shielded protection of this material so that it can decay and so that the radioiodine is reduced by 99 per cent. of its radioactivity before discharge takes place?
    Mr. Roberts: I agree with the hon. Gentleman that we want as clean an environment as possible, but I am sure he will accept that we also want as healthy an environment as possible. He surely does not object to the use of radioactive material for medical purposes. That is what happens at Singleton hospital in Swansea. I wrote to the hon. Gentleman on 31 January this year and told him:
    "The discharges from Singleton Hospital are within the limits laid down in the current authorisation which was issued in 1979."
    There is no danger whatsoever from the discharge of radioactive material in use at that hospital.

    Wintex-Cimex 85
    Mr. D. E. Thomasasked the Secretary of State for Wales whether he is satisfied with his Department's involvement in Wintex-Cimex 85; and if he will make a statement.
    Mr. Nicholas Edwards: I am absolutely satisfied that it is rigiht for the Welsh Office to participate in this sort of exercise, although on this occasion the involvement was very small.
    Mr. Thomas: Does the Minister accept that this exercise is provocative in terms of its cold-war stance, given that we are pursuing arms control negotiations? Is it not also concerned with internal security, and does not

    645
    his Department's involvement point to the fact that he has now achieved devolution for Wales by means of departmental civil servants planning for war?
    Mr. Edwards: That is the most arrant nonsense that I have heard for a very long time. There is nothing provocative in testing plans and communications systems aimed at coping with some future crisis. What we are doing has been done by successive Governments for many years.

    Railway Preservation
    Mr. Adleyasked the Secretary of State for Wales what recent discussions he has had with the Wales Tourist Board concerning the role of railway preservation both in job creation and the generation of economic activity; and if he will make a statement.
    Mr. John Stradling Thomas: While I have not recently discussed this matter with the Wales Tourist Board, I am aware that the board has given considerable support to the great little trains of Wales, both by way of marketing services and by financial support to individual railway societies totalling some £500,000 over the years. I welcome the jobs and economic benefit which the railway societies can bring to Wales.
    Mr. Adley: I thank my hon. Friend for that reply and acknowledge the excellent work that has been done. Does he accept that the transfer of some locomotives from the scrapyard at Barry to the Big Pit project at Blaenavon, which I think has the support of the hon. Member for Torfaen (Mr. Abse), would undoubtedly be welcome and would generate further economic activity in the Blaenavon area by enhancing a tourist project which could no nothing but good? Does he recognise that the problem is the purchase of the old locomotives for which, it seems, neither his Department nor the Wales Tourist Board has specific funds available? Will he bend his mind to this problem?
    Mr. Stradling Thomas: I am more than sympathetic. I had the great privilege and pleasure of officially opening the Big Pit museum. I know that I can appeal to my hon. Friend when I say that if we are unable to find the funds, I am sure that he, with his expertise in the private sector, will bend his will and mind in an effort to help fully.
    Mr. Geraint Howells: In view of the excellent work carried out by the Wales Tourist Board, will the Minister give an assurance that he will try to provide extra financial aid to the board during the next few years?
    Mr. Stradling Thomas: There have been some advances in the promotion of Wales. I shall always be mindful and do everything that I can to try to find extra funds, if resources are available.
    Mr. Gwilym Jones: In any such discussions with the Wales Tourist Board, will my hon. Friend consider further experiments with passenger services being introduced on freight lines, as British Rail is doing in a most interesting experiment on the Aberdare to Cardiff line? It introduced shopping services before Christmas and it has provided a similar service for each home international rugby match this year.
    Mr. Stradling Thomas: I have no direct responsibility for British Rail operational matters in Wales, but I
    646
    thoroughly approve of such flexibility in experimentation. We still have a long way to go. Some local authorities have put forward very interesting proposals along these lines.
    Mr. Abse: Will the Minister be a little more forthcoming about the provision of Government funds for the purchase of the locomotives to which the hon. Member for Christchurch (Mr. Adley) referred? Does he not know how important it is, in an area of such dereliction as the top part of my valley, Blaenavon, that everything possible should be done to stimulate the tourism which the Big Pit attracts? Would that not provide, for a very small sum, a considerable opportunity to assist in glamourising one of the most beautiful parts of the Eastern valley?
    Mr. Stradling Thomas: As I said earlier, my sympathies lie entirely with the questioners. However, the question that I was asked by the hon. Gentleman was whether I would be more forthcoming. With respect to the House, Mr. Speaker, the answer is no, Sir.

    European Regional Development Fund
    Mr. Knoxasked the Secretary of State for Wales what is the total value of grants which Wales has received from the European regional development fund in each of the past two years and in the current year to date.
    Mr. Nicholas Edwards: Net commitments for the European Commission's financial years of 1983 and 1984 were £45·1 million and £57 million respectively. No allocations have yet been announced for 1985.
    Mr. Knox: Does my right hon. Friend agree that the Welsh economy would be much weaker if these grants had not been received? How much has Wales received in total from the fund since its inception?
    Mr. Edwards: The Welsh economy has been greatly strengthened by the infrastructure provision. I should be grateful if my hon. Friend would put down a question on the ERDF commitment for the whole of Wales since its inception. Undoubtedly our membership of the European Community has enabled us to obtain many inward investment projects. I should like to take this opportunity to express my pleasure at the fact that Brother Industries of Japan is the tenth Japanese company to announce its decision to establish a manufacturing plant in this country, this time in Wrexham.

    Part-time Employees
    Sir Anthony Meyerasked the Secretary of State for Wales how many part-time employees there are in his Department; and what information he has about the numbers in other organisations in Wales for which he is answerable.
    Mr. Nicholas Edwards: On 1 December 1984 there were 121 part-time employees in my Department. Comparable information in respect of other organisations in Wales for which I am answerable is not held centrally.
    Sir Anthony Meyer: I can well understand that my right hon. Friend is not in a position to provide any figures, but, as we are unlikely to get back to full industrial employment, is there not now a case for gaining further acceptance of the idea of part-time employment as a preferable alternative to total idleness? Would it not be a good idea for the Government to give a lead in this matter?
    Mr. Edwards: While not necessarily accepting my hon. Friend's premise, I can assure him that my Department will give sympathetic consideration to all reasonable requests for part-time work. The Government are consulting the Civil Service unions about the guidance that should be given on the provision of viable schemes — for example, the day-care of the children of civil servants. We are developing along these lines and are sympathetic to the point made by my hon. Friend.

    Depo-Provera
    Mr. Colemanasked the Secretary of State for Wales whether he has received any representations calling upon him to reconsider the decision to allow a licence for the long-term use of the contraceptive drug Depo-Povera in Wales.
    Mr. Wyn Roberts: I have received representations from the Cardiff Community Health Council and from the Welsh office of the Labour party.
    Mr. Coleman: In view of the refusal by the United States Food and Drugs Administration to grant a long-term licence, and the results of the World Health Organisation's survey on the long-term use of Depo-Provera, which seems to show a possible link between the long-term use of that drug and a higher incidence of cervical cancer, will the hon. Gentleman begin the procedure to withdraw the licence granted in April last year for the use of that drug?
    Mr. Roberts: Let me make the position clear. My understanding is that the preliminaty findings of the World Health Organisation study show no evidence that using the drug increases the risk of breast cancer. The American public board of inquiry's recommendation to the Food and Drugs Administration not to market Depo-Provera in the United States is being considered by the Food and Drugs Administration and it has not yet decided what action to take on that recommendation. My right hon. and learned Friend the Minister for Health has asked the Committee on Safety of Medicines to consider the American report. Before granting a licence for the use of Depo-Provera as a long-term contraceptive in Britain, the United Kingdom licensing authority had the benefit of a report on the safety of the product by a panel of experts.

  CHURCH COMMISSIONERS

    Diocese of Durham
    Mr. Robert B. Jonesasked the hon. Member for Wokingham, as representing the Church Commissioners, what was the number of clergy receiving remuneration in the Diocese of Durham in each of the last five years.
    The Second Church Estates Commissioner, Representing Church Commissioners (Sir William van Straubenzee): From 1980, as at 31 December, the number of full-time clergymen was 299, 292, 298, 307 and 307.
    Mr. Jones: Is my hon. Friend aware that it is not numbers that count, but the quality of leadership, in putting over the message of the Church? Is he aware that there is widespread dismay among lay members of the Church of England at the quality of leadership given by the Bishop of Durham, with his constant espousal of beliefs which are not those of the Christian Church?
    Sir William van Straubenzee: It would be helpful if my hon. Friend were to read the remarkable speech by the Archbishop of Canterbury when the subject of doctrine was being debated by the General Synod on 13 February. I shall send him a copy. I must not take up the time of the House quoting from it, but the general message is one of which my hon. Friend would approve.
    Mr. Haffer: Is it not a matter for the Church of England, not the House of Commons, how many priests there are in the Durham diocese? Is it not time that the House of Commons stopped messing about with the internal affairs of the Anglican Church? Many of us in the Anglican Church think that it is time we decided our own affairs, without Jews, Methodists, Moslems and all sorts of other people interfering in our internal affairs.
    Sir William van Straubenzee: The hon. Gentleman undoubtedly reflects a point of view widely shared in the Church, but at the moment the Church Commissioners are answerable to the House and it is for them only that I answer, although the ingenuity of hon. Members is such that a good deal is often hung on that.
    Mr. Speaker: Order. The question is about the diocese of Durham.
    Mr. Adley: In view of the figures that my hon. Friend has given for Durham, is it not clear that at least in the Church of England in Durham there is no rising unemployment? Are the people of Durham getting good benefit from the extra people involved?
    Sir William van Straubenzee: I am perfectly certain that in relation to those to whom the answer refers the answer is emphatically yes.
    Mr. Merlyn Rees: Will the hon. Gentleman take into account the fact that the Bishop of Durham served in Leeds before he went to Durham? Last week I asked people there—whether Moslem or anything else—what they thought of the Bishop of Durham and I was told that the chap shows that he cares for the people of Durham and whatever one's political views, that is a good thing for a clergyman.
    Sir William van Straubenzee: Yes. I do not want to enter into public comment about a Member of another place, but all hon. Members understand that sometimes the words that we use when we are in a position of authority have to be carefully chosen if they are not to be misinterpreted.

    Unemployed Persons (Assistance)
    Mr. Greenwayasked the hon. Member for Wokingham, as representing the Church Commissioners, what resources the Church Commissioners have spent towards assisting the unemployed; and if he will make a statement.
    Sir William van Straubenzee: The Commissioners make a contribution towards employment in so far as the greater part of their stock exchange investments are in the ordinary shares of United Kingdom companies. They have also taken up opportunities for investment in projects in areas of high unemployment.
    Mr. Greenway: I note that contribution, but can my hon. Friend give any examples of schemes to help the unemployed at diocesan and parish level? Will he consider initiating in-service training schemes to improve the theology of some bishops and clergy?
    Sir William van Straubenzee: The Church Commissioners are not responsible for in-service or other training of bishops.
    On the first part of my hon. Friend's question, I can give him the examples of investment in the Lancashire and Merseyside enterprise fund, which has been set up to provide capital for new and existing smaller businesses in Lancashire and Merseyside; investment in four regional unit trusts in the north-east, Yorkshire and the north-west; and a scheme in Finsbury to provide small workshop units to serve the local community.

    Stipends
    Mr. Chapmanasked the hon. Member for Wokingham, as representing the Church Commissioners, by how much the contributions from parishes have changed in the proportion of the total payments for stipends in the last five years.
    Sir William van Straubenzee: The contribution from parishes for clergy stipends rose from 29 per cent. of the total in 1979 to 41 per cent. in 1981 and 44 per cent. in 1984.
    Mr. Chapman: Does my hon. Friend agree that the increasing contributions of churchgoers have been principally responsible for the significant increase in stipends in recent years? Is that not the finest possible example of the old adage that charity begins at home?
    Sir William van Straubenzee: The contributions of the laity, increasing proportionately in terms of stipends year by year, have been enormously important, but I hope that my hon. Friend has also noticed that the Church Commissioners have been able, by prudent management, to increase their contribution and that they are wholly responsible for all pensions.
    Mr. Frank Field: As the Commissioners rightly make much of their record in efficiently managing Church funds, which are largely used for stipends, how does the hon. Gentleman justify the Commissioners not selling their land at Molesworth to the highest bidder?
    Sir William van Straubenzee: Because the land at Molesworth is not vested in the Church Commissioners. It is vested in the diocese of Peterborough and is not the concern of the Church Commissioners. If the hon. Gentleman would like to know the address to which he should make his representations, I shall happily send it to him.

    Diocese of Leicester
    Mr. Peter Bruinvelsasked the hon. Member for Wokingham, as representing the Church Commissioners, what was the average clergy stipend within the diocese of Leicester in 1984; and how it compares with other dioceses.
    Sir William van Straubenzee: The average incumbent's stipend in July 1984 was £6,565 in the diocese of Leicester and £6,771 nationally. Leicester came 39th out of 43 dioceses.
    Mr. Bruinvels: I thank my hon. Friend for that answer. Does he agree that stipends do not reflect a living wage and that there are some difficulties with a number of clergy who are having to claim supplementary benefit? Will my
    650
    hon. Friend go back to the Church Commissioners and encourage them to increase all kinds of stipends so that we have the best people coming forward, rather than some strange people from Durham, for instance?
    Sir William van Straubenzee: I do not think that it is possible to generalise about stipends or to say whether a particular man is eligible for supplementary benefit. I should be surprised if that were so in the case of an incumbent. If my hon. Friend has an example, perhaps he will write to me. However, he underlines the continuing desire of the Church, both laity and the Church Commissioners, to improve the stipends of full-time clergy.
    Mr. Heffer: Will the hon. Gentleman take into account the fact that the hon. Member for Leicester, East (Mr. Bruinvels), who is concerned about the stipends of local priests, is also concerned about taking people to court? Is not it clear that the hon. Member for Leicester, East would take Jesus Christ to court because he was a revolutionary who tried to change society?
    Sir William van Straubenzee: I do not think that I am answerable for whatever my hon. Friend may or may not have said.
    Mr. Frank Field: Does the hon. Gentleman realise that if any priests are claiming supplementary benefit they are committing fraud, as no one is entitled to claim if he is in full-time work? But perhaps the hon. Gentleman will draw attention to the fact that many priests do have to claim family income supplement.
    Sir William van Straubenzee: That was in my mind when I gave my earlier answer, so I am obliged to the hon. Gentleman. However, he and I must be careful when trying to evaluate the numbers of those who are eligible for family income supplement.

  THE ARTS

    Private Sponsorship
    Mr. Chapmanasked the Parliamentary Under-Secretary of State answering in respect of the Arts if he will report progress in the encouragement of private sponsorship of the arts.
    The Parliamentary Under-Secretary of State for the Environment (Mr. William Waldegrave): Business sponsorship has increased from £500,000 in 1976 to £15 million and is still increasing. I am glad to say that the business sponsorship incentive scheme launched by my noble Friend the Minister is proving extremely popular. Awards made during its first six months will reflect £2·5 million of new sponsorships.
    Mr. Chapman: I am grateful for those figures, but does my hon. Friend agree that the recent diatribes of Sir Peter Hall et al—
    Mr. Cormack: What did Al say?
    Mr. Chapman: He is to be found among others—underline the need for the Government to stay out, as far as possible, from the politics of arts funding? Might not that best be achieved by the Government encouraging, through tax concessions, donations to arts funding?
    Mr. Waldegrave: The Government have made various concessions on the tax side for funding, but it is important

    651
    to recognise that it is no part of the Government's view that private donations could ever wholly replace the need for subsidy. However, they are a very useful adjunct to it.
    Mr. Freud: What is the total sum of private sponsorship for which the Minister is looking? Will the hon. Gentleman promise that if any theatre raises an especially large amount of money by private funding, it will not be harmed by a cut in grant?
    Mr. Waldegrave: It is not for me or for my right hon. and noble Friend the Minister to answer for Arts Council funding policies. However, I am sure that it is no part of the Arts Council's policy to penalise anybody who raises money from private sources.
    Mr. Cormack: Does my hon. Friend agree that neither Sir Peter Hall, nor Al, nor even any fresco would have had quite the problems that we have had in recent years if the Government had taken on board the excellent, unanimous, all-party Select Committee report of 1983?
    Mr. Waldegrave: My hon. Friend will want to remember that the Government have done very well by the arts since 1979, with an increase in funding in real terms of about 18 per cent.
    Mr. Tony Banks: Is it not surprising that Sir Peter Hall should find it surprising that the Arts Council is a political body, given that it is run by two Tories and that the Minister for the Arts worships at the altar of monetarism? Do the Minister and the Chancellor of the Exchequer have any proposals in hand for tax concessions for businesses that give money to the arts?
    Mr. Waldegrave: The Arts Council is not a political organisation, much though the hon. Gentleman would like it to be. I think that he would be unwise to predict exactly how Sir William Rees-Mogg votes or has voted. As I have said, the Government have taken various steps to make it easier for companies and individuals to give, and we keep the whole area under review.

    Arts Organisations (Funding and Efficiency)
    Mr. Murphyasked the Parliamentary Under-Secretary of State answering in respect of the Arts if he will initiate further independent inquiries into the funding and efficiency of arts bodies which are major recipients of public finance.
    Mr. Waldegrave: No, Sir. My noble Friend sees no case for doing so.
    Mr. Murphy: Does my hon. Friend agree that if such inquiries took place the facts could be established, and they might be preferable to the wringing of hands and to the chorus of woe, gloom and doom that we hear from the Greek chorus on the subject of arts funding?
    Mr. Waldegrave: I concede that that would be useful. On the other hand, we are rightly constantly pressed to keep the position of the Arts Council at arm's length from the Government. If there were a whole galaxy of separate inquiries, I am not quite sure where the Arts Council would be left.
    Mr. Michael Marshall: Does my hon. Friend accept that a particular problem has been caused by the activities of the GLC in threatening to withdraw funding from national companies? Will my hon. Friend give a progress
    652
    report on the situation? Does he agree that the difficulties and uncertainty which the GLC has created show exactly why it should be abolished?
    Mr. Waldegrave: I agree that the extra uncertainty created by the GLC's brinkmanship is to be regretted. I hope that it will clarify its plans and remove the uncertainty that it has caused.
    Mr. Jim Callaghan: Does the Minister recall that when the Prime Minister took office she said that there would be no candle end economies in the arts? In view of that statement, the dismay, consternation and frustration expressed in the arts world by such eminent persons as Sir Peter Hall, the fact that seven members of the drama panel of the Arts Council have resigned and that last weekend 11 leading London theatre groups expressed their opposition to the arts cuts, will the Minister now join me and the Opposition in calling for the resignation of the worst Minister for the Arts that we have ever had, the worst chairman of the Arts Council that we have ever had and the worst secretary of the Arts Council that we have ever had before the candle is finally snuffed out for the arts?
    Mr. Waldegrave: That is an example of the type of lobbying which does not help the arts. There has been an 18 per cent. real terms increase in spending on the arts. The hon. Member for Heywood and Middleton (Mr. Callaghan), coming from that area, should show some gratitude for the fact that one of the problems with which the Arts Council is grappling is directing more resources to the provinces and away from London.
    Mr. Sedgemore: Is it not time for an inquiry into the funding and inefficiency of the Arts Council, as it has completely lost the confidence of the art world and is widely regarded as a subservient arm of the Government?
    Mr. Waldegrave: It is widely regarded in that way by people who want to cause mischief. I am sure that the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) wants a politicised Arts Council. The Arts Council is wholly at arm's length from the Government, and that is how it should be.
    Mr. Jessel: Is my hon. Friend aware of the anxiety in outer London about the transfer of music, choral and orchestral societies' funding to the Greater London Arts Association from the Arts Council, which, it is feared, will be to the detriment of outer London? Will he look into that?
    Mr. Waldegrave: I was not aware of that until my hon. Friend drew it to my attention. I shall ensure that the chairmen of the Arts Council and of the GLAA are made aware of those worries, which are important.
    Mr. Buchan: Is not the truth that the arts have been grossly under-funded this year, with less than half of the inflation rate being accounted for? Not only the National Theatre, but almost every theatre in Britain is affected. Is that not the reason why the directors of almost every theatre in Britain will be meeting tomorrow to give their views on the crisis? Will the Minister tell the Minister for the Arts that if he cuts the Arts Council's funds he should at least persuade the Government not to cut back local authorities' funds? Is he aware that the GLC alone has intervened to save the National Theatre? What a disgrace for a Conservative Government.
    Mr. Waldegrave: There has been a large real terms increase in funding since this Government were elected. I thought that the chairman of the Arts Council came out much the better in the interchange in the Sunday papers.

    National Heritage
    Mr. Alan Howarthasked the Parliamentary Under-Secretary of State answering in respect of the Arts if he will make a statement on the Government's policy for preventing the loss to the nation of important and irreplaceable elements of the national heritage.
    Mr. Waldegrave: As the House will be aware, the Government announced on 21 February their intention to add £25 million this financial year to the National Heritage Memorial Fund. This is a major practical demonstration of our concern for the national heritage.
    Mr. Howarth: I offer my warmest congratulations to the Government on the reprieve of Keddlestone Hall, Weston Park, and Nostell Priory. Will my hon. Friend now turn his attention to equally good effect to future provision for the acceptance of pre-eminent items in lieu of capital transfer tax? Will he and his noble Friend make strenuous representations to the Chancellor of the Exchequer so that, in the event of the Chancellor finding it impossible to abolish the tax altogether on 19 March, future provision for acceptances in lieu will at least be at a worthwhile level rather than at the derisory level intended?
    Mr. Waldegrave: I shall draw those remarks to the attention of my noble Friend. In the current year, the AIL provisions have brought some attractive gains to the
    654
    country, such as works by Sir Jacob Epstein, Renoir, Barbara Hepworth and others. Many less spectacular but useful items have also been accepted.
    Mr. Fisher: Does the Minister agree that the Cottesloe theatre is an important part of the national heritage? Will he congratulate the GLC on having the guts to fight for it?
    Mr. Waldegrave: We should all be happy if the GLC were able to find the money while meeting its legal obligations to set a rate. That would be useful.

    Museums
    Mr. Adleyasked the Parliamentary Under-Secretary of State answering in respect of the Arts if he will make a statement on developments concerning the power of museums to charge for entry.
    Mr. Waldegrave: The Government's policy is not to impose general admission charges for the main collections of the national museums and galleries. It is a matter for the trustees' discretion. There is already a well-established practice of charging for entry to some museums, outstations and special exhibitions.
    Mr. Adley: Do the Government believe in incentives? If so, may we be assured that if museums raise funds off their own bat, they will not be clobbered by the Treasury, which, amazingly, seems to want to reduce their grants by the very amounts of money that they have raised by using their initiative?
    Mr. Waldegrave: My hon. Friend makes an important point. Discussions on the matter continue. We have had an arrangement in the first year at the Greenwich museum, whereby that has been the outcome.

Coal Industry Dispute
3.30 pm
The Secretary of State for Energy (Mr. Peter Walker): With permission, Mr. Speaker, I wish to make a statement about recent developments in the coal dispute.
Yesterday, at a delegate conference of the National Union of Mineworkers, a decision was made to end the industrial action which has been conducted by some sections of the NUM over the past year. The conference decided that there should be a return to work tomorrow.
The Government regret that this unjustified dispute, which has taken place without a ballot, has done so much damage to miners, to mining communities and to the coal industry. Without this dispute, the industry would have received £800 million of capital investment during the past year, miners' pay would have been substantially above average industrial earnings, 1,000 firms would have been persuaded to convert to coal, export orders would have been obtained, and any miner in a pit facing closure would have been given the opportunity of continuing to work in the industry or of taking advantage of early retirement provisions more generous than those available in any other industry.
The dispute has inflicted heavy damage on the coal industry and on those companies which supply that industry with plant and machinery.
However, I am pleased to tell the House that during the period of this dispute industry at large was able to obtain the energy supplies that it required. There were no power cuts due to the dispute and there are still nearly 12 million tonnes of coal stocks at Britain's power stations.
I would like to express the Government's appreciation to all those people whose efforts have ensured that Britain's energy supplies have continued to be available.
I believe that the country would also like to thank the police, who, throughout this dispute, have ensured that organised mob picketing did not deprive people of their freedom to go their place of work. Sadly, during the dispute, 1,391 police officers have been injured.
It is now vital that the coal industry swiftly returns to normal working and recovers from the damage of the past 12 months.
The National Coal Board has stated that obtaining full safety in all pits is its first priority, so that production can be restored.
Both the National Coal Board and the Government hope that the coal industry will now take full advantage of the considerable opportunities available both at home and abroad.
Mr. Stanley Orme: After 12 months, more than 100,000 members of the NUM will tomorrow go back to work without a settlement. Does the right hon. Gentleman agree that the negotiation of a settlement would have been the best way—for the miners and the industry—to end the dispute? If so, why did the Government not accept the NUM's proposal that it was prepared to sign and implement the full NACODS agreement, when the Secretary of State said on 4 February:
"if the NUM wished to accept it, it could have a settlement today or tomorrow."—[Official Report, 4 February 1985; Vol. 72, c. 622.]
Is it not a fact that until the modified colliery review procedure is in operation all pits will remain open? Is the right hon. Gentleman further aware that Mr. Peter
656
McNestry, the general secretary of NACODS, has today said that no such modified review procedure can be put in place until the NUM is party to the agreement?
What is the Government's attitude on the crucial issue of victimisation, bearing in mind conflicting reports from different areas? Will the right hon. Gentleman comment on the statement by the Scottish area director, Mr. Wheeler?
The cost of the dispute has been assessed independently as being in excess of £3·5 billion. Will the right hon. Gentleman confirm that figure?
Finally, the fortitude and tenacity with which men and women of the coalfields have fought to uphold and defend their communities and jobs has the admiration and support of the Opposition. I hope that the right hon. Gentleman will now facilitate the means quickly to arrive at a negotiated agreement, which can be the only way forward for the industry and the country.
Mr. Walker: The right hon. Gentleman's figures are totally wrong, and he must have obtained them from Mr. Scargill. If he did so, that explains their inaccuracy. It is very much the Government's wish to have an agreement and a settlement. It is a great pity that the Opposition, with such influence as they have on the NUM, did not suggest that the union should accept the ACAS compromise proposal of October 1984. Throughout the dispute there has not been an occasion when the Opposition have officially criticised Mr. Scargill for making no move towards reaching a settlement.
There was a further basis for a settlement following the talks that took place between the Coal Board and the TUC, when a document was prepared which reflected careful consideration of the points which the TUC had put to the Coal Board. That document included totally the NACODS agreement. The right hon. Gentleman mentioned the NACODS agreement and quoted from Hansard. I suggest that he refers to the quotation that was given some time ago by Mr. Scargill about that agreement. I cannot use it, because the terms in which he described it would be ruled to be unparliamentary. That prevented any agreement being arrived at last October.
The cost of the dispute is a complicated matter and one which will have to be examined carefully. It is nothing compared with the cost that would have arisen had the Government agreed to a totally unreasonable demand, with the mob being used to support it.
The right hon. Gentleman has praised the miners who have been on strike for this long period. I share with him an admiration for those who do that with a sense of loyalty to their union. I admire also those who, in the normal tradition of the NUM, decided to have a ballot and have worked throughout the strike.
Several Hon. Members rose—
Mr. Speaker: Order. I remind the House that another statement will follow this important statement. After that, there will be a public expenditure debate, which right hon. and hon. Members have been calling for regularly during business questions. I propose, therefore, to allow questions on this statement to continue until 4 o'clock. There will be other opportunities to raise the issues that flow from it.
Mr. Michael Morris: Is it not deplorable that the right hon. Members for Salford, East

657
(Mr. Orme) and for Birmingham, Sparkbrook (Mr. Hattersley) have both refused to advance the proposition that today is the right day for wounds to be healed—[Interruption.] I refer the House to "Today" this morning. I ask my right hon. Friend the Secretary of State to remember that there are 60,000 men in industries which are dependent upon the coal industry who should be considered equally in the difficult times that lie ahead.
Mr. Walker: The dispute has been totally unjustified, as we have always claimed. What is important now is for investment to be made in the industry and used wisely so that lost markets may be regained, and for unity in the mining communities and the NUM to be restored.
Mr. David Steel: I congratulate the Secretary of State on distancing himself from the "worthwhile investment" school of thought about the events of the past year. Will he recognise that the only worthwhile investment would be for all parties to learn the lessons of this disaster? The union must learn that politically motivated strikes based upon intimidation, rather than on the ballot, will not work. The NCB must recognise that arrogant and high-handed management will not work. The Government must recognise that throwing money at individuals in the form of generous redundancy payments is no substitute for dealing with the social and economic problems of communities affected by pit closures.
Mr. Walker: Of course I agree that it is wrong for a union to involve itself in a political dispute, especially without a ballot. Pits have closed for economic reasons under all Governments, but the present NCB and the present Government have done far more than any previous Government to ensure that there is an instrument for bringing new jobs and enterprise to mining communities, and have provided early retirement provisions on a more generous scale than has ever been conceived before. In any decent tradition of dealing with an industrial problem in a civilised way, the Government and the NCB should claim full credit.
Mr. Jonathan Aitken: Now that the laws of economics are to apply to the coal industry, will my right hon. Friend try to encourage the necessary moves towards low-cost, large-scale production by, first, trying to shift the difficult but necessary decision-making process for pit closures away from the television screen and into the hands of local, decentralised NCB management and, secondly, putting some real political and financial firepower behind NCB (Enterprise) Ltd so that it can develop alternative jobs for miners?
Mr. Walker: Yes, it is important that all negotiations on the future of pits, in terms both of positive investment policy and of the need to close pits that are no longer economic, should be discussed at local and regional level on the basis of all obtainable knowledge. I also place great importance upon the activities and success of the new NCB (Enterprise) Ltd.
Mr. Tony Benn: After spending £5 billion of taxpayers' money and throwing the full apparatus of the state—police, magistrates, judges, the media and the Government themselves — against the miners, the right hon. Gentleman has totally failed to win
658
the support of the majority of miners for the Cabinet's policy. Without good will, which is wholly lacking, there is no future for the coal industry.
Is the right hon. Gentleman aware that the struggle of the miners, backed by their families, and under the leadership of the NUM, has given hope to millions of people who have poured millions of pounds into the support of the miners and their communities? Is he aware that when history comes to be written—that may be sooner than the Cabinet would wish—the struggle will be seen as a turning point in the battle against monetarism and against the attack on full employment?
Mr. Walker: Of all those with militant views who have taken part in the dispute, there is no one for whose views I have less respect than the right hon. Member for Chesterfield (Mr. Benn). When he had responsibility for the industry, he paid the miners worse, invested less in the industry and offered redundancies on far worse terms. Compared with the record of the present Government, the right hon. Gentleman's record in those respects is appalling. His enthusiasm for the dispute has been only his enthusiasm for the Marxist views that he holds.
Mr. T. H. H. Skeet: While paying tribute to my right hon. Friend for the work that he has done, may I ask him to bear in mind two matters that require immediate consideration? The first is the vital question of markets for coal, and the other is the reconstruction of the finances of the NCB. The board's debt is considerable. It is virtually bankrupt. It is in need of revival, if anything can be done.
Mr. Walker: It is true that the NCB is insolvent and depends upon finance from the Government to continue. It is important that the industry conquers new markets. Bearing in mind the quality of our coal reserves, available mining machinery, miners and management, there is no reason why the industry cannot, with competitively produced coal, conquer new markets.
Mr. Peter Hardy: Does the Secretary of State agree that his rather aggressive approach to his statement led to his omitting to refer to the considerable efforts of my right hon. Friend the Member for Salford, East (Mr. Orme), who devoted enormous energy to trying to secure a resolution of the conflict? Had the Secretary of State put in the same effort, the country might have been saved £2 billion. Will the Secretary of State confirm that the NACODS agreement will now apply in full?
Mr. Walker: The answer to the hon. Gentleman's latter question is yes. The board informs me that it is endeavouring to have talks with NACODS in the near, future to sort out details and implement the scheme. Knowing the right hon. Member for Salford, East (Mr. Orme), I have no doubt that he tried genuinely throughout to obtain a peaceful settlement. I am only sorry that the leader of the NUM has not listened to the right hon. Gentleman as much as he should.
Mr. Peter Hordern: In view of the courage and tenacity of those miners who have continued to work in the face of great provocation throughout the dispute, will my right hon. Friend confirm that the investment programme of the NCB remains intact?
Mr. Walker: The NCB's investment programme will have to be reviewed to take into account the considerable damage that has been done to plant and machinery and coal

659
faces during the dispute. Management at regional level must review carefully how available resources might be used to benefit the industry. There is no doubt that there is substantial, good and rewarding investment to be made which will enable the industry to succeed.
Mr. Roy Mason: Is the Secretary of State aware that, on 28 January, and again on 18 February, I asked him to grant an amnesty to all those miners who had been arrested on picket lines and had since been acquitted? There are now 1,416 of them. On both occasions the right hon. Gentleman promised a reply. Has the chairman of the NCB replied, and if so, what is the answer?
Perhaps the Secretary of State will now clear up the latest negotiating position. On 26 February he sent a letter to Peter Heathfield saying that the NUM should accept the TUC document
"as the firm agreement on the main issues of the dispute".
Is that the Secretary of State's stance now, and the board's, or is the NACODS agreement the preferred basis for talks?
Mr. Walker: The board's views were expressed in the eight points in the programme that was put to the TUC. They concern the managerial policy pursued by the board. Among those eight points is the NACODS agreement. TheNACODS agreement will therefore be considered, as envisaged in that document. As to the right hon. Gentleman's question about an amnesty, the matter will be dealt with by the board according to individual circumstances, irrespective of whether the courts have been involved. If someone has been found guilty—[HON. MEMBERS: "These are innocent men."] If the board considers that someone has been involved in physical violence or damage to a pit, it will take appropriate action. The person concerned will have all of the protections available if the Coal Board takes any wrongful action.
Mr. Eldon Griffiths: Is my right hon. Friend aware that no group of people is more anxious for a reconciliation than that which took most of the casualties in the defence of civil liberties—the police? To assist in the process of reconciliation, will my right hon. Friend urge those who have made absurd charges against the police to drop them? Will he also make it clear that, although minor offences can properly be forgotten, the criminal law must take its course when violence is involved?
Mr. Walker: I am pleased to say that there are men working in the coalfields where the management has decided that minor offences are not sufficient to warrant sackings.
When the correct and accurate history of this dispute is written, it will be seen that the country owed a great deal to the police for the way in which they conducted their affairs in relation to communities, miners and those working in the steel industry, and in protecting freedom.
Mr. Dave Nellist: Is the Secretary of State aware that during the past couple of hours the Kent and Scottish branches of the NUM have refused to go back to work until the 42 members of the NUM in Kent and the 250 members of the NUM in Scotland who have been sacked have been reinstated? Is the right hon. Gentleman further aware that there will be
660
no peace in the coalfields until a general amnesty is given to the 728 miners who have defended their union, their class and their community during the past 12 months?
Mr. Walker: Knowing the hon. Gentleman's passion for supporting the majority decisions of the NUM delegate conference, I am sure that he will do all that he can to persuade the Kent and Scottish branches to obey.
Dr. John G. Blackburn: Will my right hon. Friend reflect on the fact that there are two victors in this dispute: first, democracy, which is the lifeblood of our society; and, secondly, the reputation of the police service, which has been enhanced in this difficult matter? Will my right hon. Friend take the opportunity of writing today to the president of the Association of Chief Police Officers conveying the appreciation of the House to the 1,300 police officers who have been injured and wounded during the dispute?
Mr. Walker: I share my hon. Friend's respect and admiration for the actions of the police. That is why I made that a major point of my statement to the whole of the House of Commons.
Mr. John Morris: Will the right hon. Gentleman be good enough to deal specifically with the question asked by my right hon. Friend the Member for Barnsley, Central (Mr. Mason) about the 1,400 men who have been acquitted?
Mr. Walker: As always with the management of any concern, the fact that a person has been acquitted of a particular offence is not a guarantee that he will continue in employment if, in the management's view, he has committed an act that is against the interests of the company. [Interruption.] If a person who has proved himself to be innocent is dismissed, he will have all the rights that he has with regard to wrongful dismissal to take action against any employer who takes that irresponsible action. As always, employers must decide whether a person is suitable to continue in employment in a particular company.
Mr. Michael Forsyth: Will my right hon. Friend join me in repudiating the attacks that have been made on the Scottish Coal Board representative, Mr. Albert Wheeler, whose conduct throughout this dispute has been exemplary? Will my right hon. Friend join me in advising miners in my constituency to ignore the advice that they have been given by their leadership and get back to work? In Scotland, 700 jobs have already been lost because of a loss of pit faces. It is necessary for the miners to get back to work and build the industry.
Mr. Walker: Before the NUM delegate conference on Sunday, a substantial proportion of Scottish miners had returned to work. I hope that the rest will return to work tomorrow.
Mr. Willie W. Hamilton: As the Secretary of State referred yesterday to the need for reconciliation, will he ensure, as an earnest of his endeavours, that sufficient money is available to the areas where the closure of pits is likely to be expedited because of what has happened during the past 12 months? Will the right hon. Gentleman undertake to sack Ian MacGregor, to show the miners that he means business?
Mr. Walker: The answer to the second part of the hon. Gentleman's question is no. On the first part of the

661
question — I tried to say this in an earlier reply — the board must now carefully consider where best to use the substantial financial facilities that will be available to the industry to secure its future. There will be places where damage has been done which will be a priority for restoration. I am afraid that there will be other places where damage has been done which it will be impossible to make good.
Mr. Peter Rost: Will my right hon. Friend give an assurance that in those pits where work goes back to normal, including the abandonment of the overtime ban, miners will be properly rewarded, and that the board will negotiate on a pit-by-pit basis to see that the arrears of pay come along as they should have done long ago?
Mr. Walker: Yes. It is the board's objective, and has been throughout, to see that miners' pay is at a good level. The offer that it made before the dispute started would have put miners' pay more than 25 per cent. above average industrial earnings. I am only sorry that the dispute has meant that for many miners that has been lost. Likewise, all miners should recognise that it is in their interests and in the interests of the future and recovery of their industry that normal working, including the removal of the overtime ban, starts as quickly as possible.
Mr. Dennis Skinner: Is the Secretary of State aware that the union is correct in calling for an amnesty for all those who have been sacked by the Coal Board, just as previous Governments have given an amnesty to other groups in our society, such as the Rhodesian sanction busters, who were let off the hook many years ago by a previous Tory Government, and those companies which fail to file their returns and break the law? They are given an amnesty at the end of every financial year to carry on their tax dodging and all the rest of the fiddles. If the miners' union cannot obtain an amnesty for all, resistance must continue, the overtime ban will not he called off, and we shall carry out the war of attrition which will result finally in victory.
Mr. Walker: I am glad that the Leader and Deputy Leader of the Opposition have made it clear that they consider that employers have to take the decision. I think that they are right.
Mr. Michael Grylls: Will my right hon. Friend do all that he can to encourage British and overseas inward investment in the mine closure areas? Will he also consider, with his colleagues in the Government, extending the successful enterprise allowance scheme to encourage miners who take early retirement to set up their own business? Can he help in that way?
Mr. Walker: Yes. My hon. Friend has been active in trying to give incentives and encouragement to new businesses. A combination of what the Government have succeeded in doing in that sphere, together with the money, facilities, accommodation and management facilities available through the new enterprise company, will provide good opportunities in mining communities for the creation of the kind of small businesses which my hon. Friend has done so much to champion.
Mr. D. E. Thomas: Now that the Secretary of State has failed to break the NUM's unity in South Wales and other areas, will he turn away from the uneconomic burning of oil—it has cost £1·7
662
billion during the course of the dispute—and study the real economics of energy policy? Will his Department now institute the review of energy policy which the Welsh Church leaders called for a month ago?
Mr. Walker: No one has so completely destroyed the unity of the National Union of Mineworkers as has Mr. Arthur Scargill. That union is now divided from top to bottom, as well the hon. Gentleman knows. On the question of energy policy, the Government made it clear that their objective was to have mining as an important and expanding industry, producing coal at low cost, with high productivity and good pay for the miners. The Government continue to pursue that policy.
Mr. Mark Robinson: I am sure that my right hon. Friend is aware that no one will welcome the decision to return to work more than will the steel workers of South Wales. Will he make it clear to the NUM and the railway unions that orders that have been suspended or lost because of the dispute will not return automatically to those industries? They will have to earn them. The only way to earn them is to get back to work properly and to end the overtime ban.
Mr. Walker: There is no doubt that the future of the industry depends upon a speedy return to normal working to take advantage of the investment and the new markets that are available. That is in the interests of all. With regard to the steel industry, looking back on the dispute, I think that we all admire the manner in which steelworkers and the steel industry did not just overcome the problems of mass mob picketing, but in recent months have peen reaching record production figures.
Mr. Stan Crowther: Would it not be the mark of an honest man for the Secretary of State to admit that all the terrible consequences that have flowed from the dispute could have been avoided if the Government had not deliberately provoked the strike a year ago, through the National Coal Board, in the mistaken belief that miners would be brought to their knees in a matter of months? Before the right hon. Gentleman engages in too much self-righteous gloating, will he reflect on the fact that the damage that the Government have done, the anger, the bitterness and the resentment will be endemic in the industry for many years?
Mr. Walker: That sermon should be preached to the president of the National Union of Mineworkers. There is clear evidence that last March, had the terms available been put to the miners in a ballot, as they have always been put to the miners in a ballot—[Interruption.] Let me remind hon. Members that one third of Britain's coalfields stuck to the NUM's normal tradition of balloting and voted 70 per cent. against strike action.
Several Hon. Members rose—
Mr. Speaker: Order. In view of the interest in the statement, I proposed to allow a further five minutes on it.
Mr. Cecil Franks: Does my right hon. Friend accept that when the coal mining industry was nationalised in 1946 it owed nothing to commercial logic but everything to the folk tales and myths of the Labour party and the Labour movement? Does my right hon. Friend also accept that the strike of 1926 took place over 60 years ago, long before many of

663
today's miners were born, and in circumstances totally different from today's industry? Will my right hon. Friend therefore consider, together with his colleagues, the privatisation of the mining industry?
Mr. Walker: The important thing is to restore the mining industry from its present position of considerable insolvency and damage. No immediate consideration is being given to privatisation.
Mr. Allen McKay: Does the Secretary of State not understand how the dispute started? The closure of Cortonwood was something which no trade union leader or trade union worth his or its salt could not but take up. Will the right hon. Gentleman reconsider his answer to my right hon. Friend for Barnsley, Central (Mr. Mason) about an amnesty? That single issue in one of the most peacemaking issues on which the Secretary of State could put his finger. Will he see to it that the people who are taken back do not have a break in their service, but that their service is continuous, because that is very important? Does the right hon. Gentleman further accept—
Mr. Speaker: Briefly.
Mr. McKay: It is important. Does the Secretary of State accept that the biggest danger to the coal industry is Ian MacGregor and that he is not the man who should take the industry through to the peace which the right hon. Gentleman wants? The names that I gave him many months ago are of the people whom he should be considering to bring the industry into the future.
Mr. Walker: With regard to the origins of the dispute, every miner at Cortonwood was circulated immediately with the fact that the NCB was willing to go through all the normal procedures, and it was the NUM which decided not to turn up for those procedures. I repeat that, on that or any other issue, if the NUM thought that it was something that miners throughout the country would support, it could have done the normal thing in the NUM and gone for a ballot.
With regard to an amnesty, I am quite certain from the manner in which the management of the Coal Board has already acted, that the people involved in minor cases, where there has not been serious physical injury to Coal Board employees or considerable damage to its property and machinery, will have their cases carefully considered. The NCB has no desire other than to employ people who are decent people to employ. That is how the NCB will operate.
Mr. Tony Favell: With regard to a possible amnesty for the perpetration of violence, will my right hon. Friend bear in mind that the vast majority of people in this country are decent and law-abiding and have been absolutely appalled at what they have seen on their television sets and read in the newspapers, and would be equally appalled if they were now to see that might was right?
Mr. Walker: I think I am correct in saying that the majority of the House takes that view as well.
Mr. Martin J. O'Neill: Does the Secretary of State agree that there is no surprise at the decision of the Scottish area not to go back to work
664
tomorrow, in the light of the blanket refusal of the director of the NCB in Scotland to consider lifting the ban on any individual person who has received his books? Will the right hon. Gentleman please help the situation in Scotland and say to the NCB that it must reconsider its position and start reconciling itself to reality?
Mr. Walker: I can only say that when there is normal working, the conciliation procedures of the NCB allow any individual case to be looked at fully.
Mr. Allan Rogers: Before the Secretary of State's money-grabbing friends start to influence him towards privatisation of the coal industry, may I point out that the reason why the coal industry was nationalised in the first place was that it was incompetently managed and, when it was taken over by the state, was completely bankrupt? That was pointed out as far back as 1919 by the Sankey commission. The only thing that has not changed in the coal industry between pre-nationalisation and now is the bad, incompetent management, especially on investment decisions.
Mr. Walker: If the hon. Gentleman considers that it is bad, incompetent management, especially on investment, under this Government, I can only say that it must have been absolutely dreadful under the right hon. Member for Chesterfield (Mr. Benn).
Mr. Michael Marshall: Does my right hon. Friend agree that one of the best ways in which the industry can begin to repair the damage that has been done is to end the overtime ban? Does he further agree that that would help many of those who have needlessly suffered grievous financial hardship during the strike? Will my right hon. Friend ask the Coal Board to do all that it can by putting forward at least part of the money that is on offer by way of wage increase to bring that about?
Mr. Walker: We know that the Nottinghamshire miners who have been at work have decided to get rid of the overtime ban. After the considerable financial losses of the families and mining communities, and in the interests of the future of the industry, it is essential that normal working, including the removal of the overtime ban, is achieved as quickly as possible.
Mr. Frank Haynes: Now that the Secretary of State has had his few gloating moments when he made his statement, will he look at the Royal Commission's report on energy, because the Prime Minister has regularly said that uneconomic pits must close? If the right hon. Gentleman looks at the report, he will see that most of the pits in Britain are uneconomic, according to the report. Therefore, what will the right hon. Gentleman do about uneconomic pit closures? Will he come clean now and tell us how many pits will close?
Mr. Walker: The Government have announced in their projections of investment policy substantial investments in the industry for the years to come. One Royal Commission has also said that for environmental reasons we should be totally nuclear. In fact, the Government have taken the view that the coal industry has an important, major future in producing coal on a competitive basis. We have been willing to put more investment into that than were the previous Labour Government.
Mr. Alexander Eadie: Does the Secretary of State accept that we in Scotland are not a

665
region, but a nation? We are a country, and we are entitled to have an organised return to work in conformity with the decision of the NUM special conference yesterday, in the same way as any other area. Is the right hon. Gentleman aware that the area director of the NCB is preventing that by his brutal declaration of a policy of victimisation, and that because of that the dispute in Scotland is to continue? Where is the language of conciliation there? Will the right hon. Gentleman inquire into that? We want justice and fairness in Scotland, and we are entitled to it.
Mr. Walker: As I explained, the conciliation procedures of the NCB, when normal working applies, deal with any such problems. Many of us observing the Scottish scene very much regret some of the violence that took place there.

Northern Ireland (Terrorist Killings)
4.9 pm
The Secretary of State for Northern Ireland (Mr. Douglas Hurd): I shall with permission, Mr. Speaker, make a statement on last Thursday's attack by the Provisional IRA on Newry police station and on later incidents in which two members of the security forces died.
At about 6.40 on the evening of 28 February, nine mortar bombs were fired at Newry police station from a lorry parked about 200 m away. The lorry had earlier been stolen near Crossmaglen. Seven mortar bombs exploded. One of them hit the prefabricated canteen at the back of the police station. Three exploded at the front of the police station, two more exploded on derelict property opposite, and the seventh exploded in the garden of the rear of this property. The two mortar bombs which did not explode landed in a street near the police station. Nine police officers, including two policewomen, were killed. Seven other officers were taken to hospital, one of whom is still detained, and 23 civilians also received treatment.
Later that evening at about 10.30, a device beside a telegraph pole in Pomeroy, County Tyrone, exploded as an Ulster Defence Regiment foot patrol passed. One soldier, a part-time private in the regiment, was killed and another soldier was injured. Yesterday morning outside St. Gabriel's Roman Catholic church in Enniskillen, two terrorists shot dead an off-duty RUC officer in front of his wife and children. The terrorists escaped in a stolen car towards the border, and abandoned the vehicle at Belcoo. The Provisional IRA has claimed responsibility for all those brutal murders.
I reviewed security arrangements with the deputy chief constable and the general officer commanding on Friday and they are now being urgently re-examined. So far as the attack at Newry is concerned, no building can be made impregnable, and the risks faced by the security forces in Northern Ireland are well understood. But I have already approved a capital expenditure programme for police building of between £20 million and £25 million in the next three years, including a new police station in Newry. We shall now look carefully and urgently at possible further physical measures for the protection of buildings and at all the procedures designed to forestall attacks of this sort.
These attacks on Protestant and Catholic members of the security forces show once again the callous savagery of the terrorists. I know that the whole House will wish to join me in expressing our deepest sympathy to the families of the dead and injured, and our appreciation of the courage and steadiness of the security forces. I believe that this House will want to send out another message: we must not and will not bow to terrorists—the terrorists will not win.
Mr. Peter Archer: We in the official Opposition unreservedly join the Secretary of State in his expression of sympathy for the families of those who lost their lives, and with members of the RUC, the UDR and the civilian canteen workers who suffered injury. We echo his tribute to those in the security forces who are continually subjected to such appalling risks. We condemn, as he does, the cold-blooded use of murder for any political objective, and we believe that any cause is degraded and disgraced when it is pursued at the expense

667
of broken bodies and broken families. We hope that the Secretary of State will welcome the forthright condemnation by the Taoiseach of these atrocities.
While we endorse the proposals of the Police Federation for a programme to reinforce and protect police buildings — I thank the right hon. Gentleman for confirming that that will be implemented as a matter of urgency—does the Secretary of State appreciate that inevitably and understandably there will be calls for less restrained responses, which may be as likely to penalise the innocent as to punish the guilty? Will he examine any new security measure which may be suggested to ensure that it is not counter-productive and precisely the sort of action for which the terrorists must have hoped? Does he agree that solutions proposed in the immediate aftermath of such a series of outrages may be better considered when the judgment of us all is somewhat calmer? Does he further agree that there can be no end to the bitterness and bloodshed until a stable political settlement is achieved, on which a substantial majority of decent, law-abiding people in both traditions can reach agreement, and forget their differences? Will he do all he can to ensure that acts of mindless terrorism do not impede that objective?
Mr. Hurd: I am grateful to the right hon. and learned Gentleman for his opening remarks. I endorse what he said about the forthright condemnation by the Taoiseach of what happened at Newry, and of the specific offer of help which Dr. FitzGerald made in the same statement. We must consider calmly all measures, and adopt measures which, on consideration, will have the effect of helping us to destroy terrorism. As the right hon. and learned Gentleman said, political progress is certainly essential. He would not regard, or wish the House to regard, it as a substitute for robust security policy because those with whom we are dealing in the struggle against terrorism are not interested in and would not be appeased by discussions or political concessions made in their direction.
Mr. James Nicholson: I thank the Secretary of State for his expression of sympathy to all those who were bereaved in my constituency last Thursday night. Will he ensure that a full inquiry is conducted into this brutal and callous attack, that the inquiry examines all ways in which such attacks can be prevented in future and how perimeter surveillance can be improved to ensure that no repetition of Thursday's attack can ever occur again? Finally, will he assure the House that financial restrictions will not be a consideration in the strengthening of border RUC stations?
Mr. Hurd: I am grateful to the hon. Gentleman for the way in which he phrased his questions and, indeed, for the line which he has been taking throughout the tragic period since Thursday night. I agree that the investigation policy that I have announced should cover the whole question of the protection of buildings and also the procedures, such as patrolling, which, as he knows, takes place around the perimeter of a police station when it is within the range of a mortar bomb. I agree with his points and also that financial restraints should not play a part in the consideration of these matters. There is just one point which I am sure the hon. Gentleman will corroborate from his local knowledge. It is that when a police station is in the centre of a town, as it is in Newry — all hon.
668
Members will agree that the town centre is a desirable place for a police station—the task of making absolutely sure that it is protected against such assaults becomes extremely difficult.
Rev. William McCrea: I join right hon. and hon. Members in condemning the merciless butchery and the cold-blooded murder of eight gallant RUC men, two RUC women and one gallant member of the UDR. I express my deepest sympathy, and trust that those whose homes and hearts have been broken will know that there are many good people in Ulster who support them, even in prayer. Is the Secretary of State aware that two of those gallant members were from my constituency? Mrs. Ivy Kelly was an honourable young policewoman who served her company with distinction. Mr. Trevor Harkness was a gallant young UDR member with five young children. He had the same size of family as I have. His eldest child is nine and the youngest only two. Yesterday I stood at the side of a grave when the rain was pouring down from the heavens and saw a young woman kneel beside the coffin and kiss it before it was laid in mother earth. To see that, even a heart of stone could turn into one of suffering.
Will the Secretary of State acknowledge that, after 16 long years of terror, Ulster people have the right to ask the Government when they intend to fulfil their promise to eradicate terrorism? Does the Secretary of State believe that any Government can eradicate guerrilla IRA murder activities without strong military measures? Will the Secretary of State explain why the surveillance at Newry was cut? Should a disused building not have been under constant surveillance as a potential launching pad for mortar bombs? In the name of all decent, law-abiding citizens in Northern Ireland, I call on the Secretary of State to embark on a relentless offensive against the provisional IRA and all terrorism until these are wholly eradicated. There will be voices of dissent, but does the Secretary of State not agree that all honourable citizens would thank God for such effective action against cruel, vicious, vile and degenerate murderers.
Mr. Hurd: The hon. Gentleman speaks with emotion, and he has conveyed it effectively to the House. I felt something very similar when I looked at the remains of the portakabin in Newry on Friday afternoon. As the hon. Gentleman knows, the security forces have achieved substantial successes, not least in the last few weeks and months. I confirm that our aim is not to contain terrorism but to eradicate it. His point about patrolling now falls to be examined. I believe that the aim of eradicating terrorism can be achieved. It will require steadiness of purpose to grind down the sources of recruitment for the IRA as well as the sources of money and guns. It will require co-operation with the Government of the Republic. It will also require full-hearted co-operation from all parts of the community in Northern Ireland. Given that, the aim of eradication—which is the only aim that a responsible Government could propose to this House — can be achieved.
Mr. J. Enoch Powell: Is the right hon. Gentleman aware that the people of Mourne, who are deeply, and in many cases personally, involved in the casualties of last Thursday, will learn with appreciation of the tribute paid by himself and the way in which it was received by the House? Is he further aware that the only rational hope of eventually seeing an end to a succession

669
of events such as these lies in the firm, public and consistent perseverence in the lines of policy laid down by the Prime Minister last November?
Mr. Hurd: The adjectives that the right hon. Gentleman has just used were well chosen. Success in security policy, as in our other efforts in Northern Ireland, will come through steady adherence to publicly proclaimed objectives. Provided we stick to that, I believe that we shall gradually make progress and finally achieve success.
Sir John Biggs-Davison: Is it not a strange confusion that from time to time the security forces should be reviled, even by some of the Catholic clergy, when they shoot dead armed terrorists engaged in murderous operations? Is there not some hope that these events will help to dispel that confusion?
Mr. Hurd: The security forces face not just the terrorists but a series of generalised criticisms—made sometimes in good faith, sometimes in bad, and sometimes even by those whom they are seeking to protect as well as by those whom they are seeking to destroy. They must wrestle with that just as we in Government must wrestle with it. I hope that one side effect of the tragedy at Newry and the others that I have mentioned will be to concentrate people's minds away from such unhelpful, inaccurate generalisations and towards the reality that faces everyone in Northern Ireland.
Mr. Stephen Ross: I assure the Secretary of State that the alliance parties join him in his expression of sympathy to the relatives and colleagues of those so cruelly struck down in the past few days. Has the time not come to join with the Republic to establish one co-ordinated security force to operate in the border areas? It was obvious from the right hon. Gentleman's statement that the lorry was stolen at Crossmaglen and that the people who carried out the shooting went towards the border. Has the time not also come to give greater protection to those brave men who are still serving in the police and prison services? We remember the senior prison officer who was so cruelly shot down outside Armagh cathedral only a fortnight ago. Is it not also time that we gave greater protection to people of the Roman Catholic faith?
Mr. Hurd: On the hon. Gentleman's second point, the Chief Constable is always considering, naturally enough, how he can best protect the officers under his charge, whether they are on or off duty. It is a formidable task. The thought of providing protection for men as they go to and from mass is a formidable business, and few of us would want to be surrounded by that kind of protection when we were at worship. Nevertheless, the hon. Gentleman is right in that the problem remains and must be constantly reviewed.
As to his first point, we are all in favour of thickening the effectiveness of co-operation north and south of the border. Co-operation between the RUC and the Garda is good, but there are always ways in which it could be improved. That is one of our tasks.
Mr. Richard Needham: Was not my right hon. Friend as shocked as I was to read press reports that following this ghastly attack there were several times — I am sorry, but coming from that part of the world and having been there many times, this event has left me with as much upset as any other hon. Member. Did
670
not these press reports seem to show that there were examples of many people — I am sorry, but I cannot finish my question.
Mr. Merlyn Rees: I strongly support the views expressed in all parts of the House, particularly the view of my right hon. and learned Friend the Member for Warley, West (Mr. Archer), that too often in this country those who murder and kill in Ireland are somehow regarded as freedom fighters. They are not. I go further. All paramilitaries, whether Loyalists or Republicans, believe in murder as superior to the ballot box, and no-one from any part of the political spectrum who believes in democracy can give them even a modicum of support.
Some of the media reported on Friday that somehow these clever chaps in the provisional IRA had discovered new weapons, but to my knowledge this weapon was used five or six years ago. It is not a new weapon, and the IRA should not be written of as if somehow it has tapped great expertise in other parts of the world.
Does the right hon. Gentleman recall, as I do, that when some of my officials met the provisional IRA it said, "Get the troops out of Northern Ireland — not too quickly because we do not want a Lebanon." The troops are now practically out of Northern Ireland. There are very few British troops there. Those who talk of "troops out" do not know what has happened, but the provisional IRA has changed its tack. It now kills fellow Irishmen, whether Catholic or Protestant, and now that the police and those who work with them are bearing the brunt, we should support them.
Mr. Hurd: I am grateful to the right hon. Gentleman. His remarks were extremely helpful. The point that he made at the beginning was just. I looked at the lorry with the mortar tubes still on it and I have gone carefully into its origins. The right hon. Gentleman is entirely right. This kind of equipment has been used nearly 20 times, with a remarkable lack of success up to this point. I deliberately mentioned in my statement where the different bombs had fallen. That shows that this was an entirely indiscriminate attack. Civilians not connected with the police but who lived in that built-up area might have been killed in large numbers from the same device. This is an old, indiscriminate weapon which on this occasion had the fortune—if that is the right description—to land on the portakabin. Therefore, the right hon. Gentleman is right in saying that there is nothing new, subtle or clever about this device.
I think I got the gist of what my right hon. Friend the Member for Wiltshire, North (Mr. Needham) was saying. He was referring to press reports about attitudes in Newry. When I was in the town on Friday, my strong impression was that the people of both communities were deeply shocked and angered by what had happened. This is borne out by the reactions that the Royal Ulster Constabulary has received and by the torchlight vigil. I hope that that anger and shock will be translated into active co-operation to forestall anything similar taking place in the future.
Mr. Ken Maginnis: May I join the Secretary of State in expressing my sympathy for those members of the security forces who have been killed during the last fortnight? I had the sad task of visiting several of their homes over the weekend. Will the Secretary of State take this opportunity again to

671
clarify the situation in relation to the charge of sectarianism that was made against the Ulster Defence Regiment? Will he tell the House how Roman Catholics have been forced out of the regiment during the past few years just as, over the last fortnight, six Roman Catholics have been killed by the IRA because they were members of the RUC or of the prison service? Will he also accept that, second only to their desire to see a complete end to violence, my constituents want no retaliatory action to be taken against their Roman Catholic neighbours? Finally, will the Secretary of State please grasp the nettle that so far has not been grasped by any Secretary of State and proscribe Sinn Fein, which is the public face of the IRA?
Mr. Hurd: We have often discussed the hon. Gentleman's last suggestion. It is not a matter upon which the mind of the Government should be closed. However, examination of this matter both by my predecessor and by me has led to the conclusion such action would not help the security situation and that it might, indeed, create problems for the Royal Ulster Constabulary in enforcing the new ban that would be substantially greater than the RUC faces at the moment. I share the hon. Gentleman's feelings both about the Royal Ulster Constabulary and the Ulster Defence Regiment and also about what may be emerging as a deliberate attempt by the terrorists to single out Catholic members of the security forces. It is a strength of the security forces, particularly the RUC, not so much of the UDR, that they are able to recruit in both communities. It is very important that that strength should be maintained. It may be that the terrorists are deliberately aiming at Catholic members of the prison service and the RUC. That, I believe is a sufficient commentary upon their objectives and methods. I agree entirely with the hon. Gentleman about retaliatory acts by members of the majority community. That would set us on a well-established road to ruin. I am sure that the whole House would join the hon. Gentleman in deploring any such prospect.
Mr. Ivor Stanbrook: In seeking to combat terrorism in Northern Ireland, will my right hon. Friend bear in mind the fact that a significant proportion of all those who have been convicted of scheduled offences go on, after release, to commit further terrorist offences? Has not the time come, therefore, for a new sentence to be introduced of imprisonment for the duration of the emergency, in addition to the imprisonment that is dealt with at that time, so that such terrorists are not released so long as terrorism continues in Northern Ireland?
Mr. Hurd: An important principle which we have tried to follow in recent years is that those who commit murder are murderers and that no special procedure or penalty should be attached to them because they claim that they were acting on a political basis. Once one opens up the distinction between different kinds of murder there are consequences for many other matters — for status in prison, for extradition, and so on. Although we should all the time be examining ways of making sure that terrorists do not return to their old ways when released from prison, I am not at first sight attracted by my hon. Friend's specific proposal.
Mr. Roy Beggs: Will the Secretary of State take this opportunity to point out to hon. Members
672
that a war between Protestants and Roman Catholics is not taking place in Northern Ireland, that such a war has never taken place but that a war is being waged upon the entire community by those who are determined to destroy the democratic process there? Will he share my hope, as I attended this morning the funeral of a Roman Catholic policeman, who was a constituent, in Carrickfergus and whose fiancée was a Protestant, that the grief shared by Protestant and Roman Catholic families ought to unify all right-thinking people in demonstrating clearly their support for the security forces? Will he further appeal to those who hold responsible positions in radio, television and the press that they should cease to interview those volunteer liars who attack our security forces and who attempt to defend the indefensible acts perpetrated by terrorists?
Mr. Hurd: The hon. Gentleman's opening remarks were particularly well chosen. I agree with the main thrust of his question, namely, that the shock that he has sensed in his constituency in both Catholics and Protestants alike about what has happened needs, before it evaporates, to be transformed into an active determination to work with the security forces who rely upon information and upon all kinds of co-operation if they are effectively to do their job of protecting the community.
Mr. Robert Maclennan: Does the Secretary of State accept that when he speaks, as he spoke today, with calm, measured determination about the Government's commitment to rooting out terrorists with the full co-operation of the community in the Province, he speaks not for the Government alone but for the people of this country, and that he enjoys the full support of all hon. Members? Will he also say that in the review of the terrible events of which he spoke he will thoroughly investigate the reports that have subsequently appeared that the lorry from which the shots were fired appeared easily to penetrate the proximity of the police station at Newry? The report appeared yesterday in, among other newspapers, The Observer.
Mr. Hurd: Yes, indeed. I am grateful to the hon. Gentleman. When a police station is in the centre, as this one is, of a quite well populated town, and mortars are fired within a range of 200 or 300 metres, there are bound to be quite a number of places where a lorry can pause for four or five minutes, which is all that is required, without attracting particular concern. However intensive the patrolling may be, there is always that risk. It is better that the House should be clear about that point. Subject to that proviso, the hon. Gentleman is right. This is one of the matters that falls to be examined.
Mr. Eldon Griffiths: Since the first requirement of security is to provide adequate protection to the police and security forces, will my right hon. Friend consider extending the capital programme that he has announced today, which is very welcome, not only to police stations in exposed areas but to the homes of police officers who are resident in those dangerous places? If he were able to do that, my right hon. Friend would certainly win a great deal of support from the men and women who are daily exposed to the risk of being terribly murdered.
Mr. Hurd: I am grateful to my hon. Friend. As he will readily agree, there are problems about that, but the

673
physical security of our officers in their private homes needs to be considered. On my hon. Friend's first point about police buildings, I point out that a suggestion has been made in the press that the police might be safer in conventional buildings rather than in portakabins. We need to think carefully about that matter. Powerful mortar shells such as these do fearful damage wherever they fall. In the case of conventional buildings, there is the additional problem of people being trapped by falling masonry.
Mr. David Winnick: Is it not the case that the Provisional IRA, which glories in these horrifying murders, is most anxious that no political progress should be made between Dublin and the British Government? Therefore, is it not all the more urgent that both the British and Irish Governments should try to reach agreement, look again at the proposals in the Forum report, and, at the end of the day, produce a political solution for Northern Ireland which will be acceptable and fair to both communities there?
Mr. Hurd: My right hon. Friend the Prime Minister, my predecessor and I have made clear our views on the specific options of the Forum. A solid co-operative working relationship between the Republic of Ireland and ourselves is very much in the interests of Northern Ireland.
Mr. Anthony Beaumont-Dark: Does not the murder of the RUC officer in front of his wife and teenage daughters show the kind of barbarism that one is up against? Does that not mean that those responsible must be sheltered not just by one but by a people? If one takes the lesson of the second world war one sees that where partisans were supported by local people they survived and where they were informed upon and betrayed by local people they were wiped out. Does it not follow that we should not be calling for more troops or police in Northern Ireland because, however many troops or police there are, the will, wish and cover of local
674
people cannot be overcome? Surely the answer lies in more people not telling us that they are shocked or how awful something is, but doing something about it? The answer to the problem is as much in their hands as it is in those of the police or the armed forces.
Mr. Hurd: The discussion that we have had in the House has been remarkably realistic in tone and it has turned specifically on my hon. Friend's point—the need for all those whom the security forces protect to give them full-hearted co-operation.
Mr. D. N. Campbell-Savours: In the light of the most recent threats to sports gatherings and venues in Ulster, what additional security measures will be introduced and what undertakings on security can the right hon. Gentleman give?
Mr. Hurd: Obviously, the RUC pays particular attention to sporting occasions. It has to. But I hope and expect that sporting organisations in the United Kingdom and throughout the world will treat that particular piece of bravado with the contempt that it deserves.
Mr. David Heathcoat-Amory: Will my right hon. Friend today request the Leader of the Opposition formally to dissociate himself from the Republican wing of his party and, in particular, to stop convicted terrorists being invited into this building, which is not only an insult to the dead but encourages terrorists to think that one day they will achieve their aims through the Labour party?
Mr. Hurd: That is not a matter for me, but I hope that everyone with responsibility in these matters will realise the nature of Provisional Sinn Fein and its links.
Mr. Stuart Bell: Let me make it clear to the House, the Secretary of State and the Government, as has been made clear this afternoon by other Labour Members, that we abhor violence of any sort or description. We shall today, tomorrow and always.

Coal Industry Dispute
4.43 pm
Mr. Dave Nellist rose—
Mr. Speaker: I had rather assumed that the statement that we had today had subsumed the hon. Member's application under Standing Order No. 10. We had a long run on it and an important debate is to follow. I cannot stop the hon. Member from making his application, but it would be an abuse of our procedures.
Mr. Nellist: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing an urgent, specific and important matter that should take precedence over tomorrow's business, namely,
"the refusal of the National Coal Board to grant an amnesty to those miners sacked during the past 12 months of the strike."
The matter is urgent because, despite the decision of yesterday's delegate conference, we heard in the House one hour ago that already Scotland and the Kent areas of the NUM have refused to go back to work. No peace in the remaining areas will be seen until justice is granted for the 728 miners so far sacked out of nearly 10,000 arrests made in the past 12 months.
The matter is specific because the House must deal with the double standards of the NCB which has sacked striking miners, often for offences such as the theft of £4-worth of slag coal, processing those miners through the supermarket courts, while welcoming with open arms convicted miners who were prepared to return to work. Charges of blackmail have been levelled against the Government, the NCB and the police, and the House should debate the several occasions when those bodies have agreed to drop charges if miners were prepared to break the strike. Convicted miners have served their sentences and are now to be doubly punished.
We also need a debate about those miners who have been found innocent. I raised the case of Clive Ham in the Chamber when it first arose. That concerned a miner in Coventry who, along with his 18-month-old son, was arrested and put in a police cell. He was charged and arraigned before a court, and between those two procedures he was sacked. The court found him not guilty but the NCB has refused to withdraw the letter of dismissal.
Almost one hour ago exactly the Secretary of State for Energy said:
"acquittal is not a guarantee that someone has not committed an offence."
The Secretary of State is setting himself up as judge, jury and executioner—and that from a member of a party that calls itself the party of law and order.
Those miners are guilty only of fighting for union policy. If the Government seriously want a workable arrangement between the union and the NCB, which I
676
seriously doubt, there should be a debate tomorrow to allow the Government to announce a general amnesty. [Interruption.] I hope that the public school hooligans will restrain themselves for 30 seconds.
I have been proud to work alongside the miners of Coventry and Warwickshire during the past 12 months. I feel nothing but respect for the miners, their wives and families, who have resisted everything that the Government have thrown at them and who have fought the Government to a standstill. The 11 miners from Keresly colliery in Coventry who have been sacked, four of whom were released from prison last Monday after being convicted of an affray at their own house, have been sacked by the NCB in Coventry and Warwickshire for so-called industrial misconduct. The cases of those men are symptomatic of the 728 men dismissed nationally. That has happened during a period when no police officer has been dismissed for his conduct during the strike.
The matter is urgent, specific and important. That double-dealing and the statement of the Secretary of State one hour ago should be fully exposed in a debate in the House tomorrow.
Mr. Speaker: The hon. Member for Coventry, South-East (Mr. Nellist) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the refusal of the National Coal Board to grant an amnesty to those miners sacked during the past 12 months of the strike."
I have listened with care to what the hon. Gentleman has said. I do not consider that the matter that he has raised is appropriate for discussion under Standing Order No. 10, and, therefore, I cannot submit his application to the House.

Statutory Instruments, &c.
Mr. Speaker: With the leave of the House, I shall put together the Questions on the three motions relating to statutory instruments.
Ordered,
That the draft Weights and Measures (Solid Fuel) (Carriage by Rail) (Amendment) Order 1985 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Pneumoconiosis, Byssinosis and Miscellaneous Diseases Benefit (Amendment) Scheme 1985 be referred to a Standing Committee on Statutory Instruments, &c.
That the Social Security (Contributions, Re-rating) Consequential Amendment Regulations 1985 (S.I., 1985, No. 143), be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Lennox-Boyd.]

SCOTTISH AFFAIRS
Ordered,
That the matter of the Government's Public Expenditure Plans to 1987–88, in relation to the Scotland Programme, being a matter relating exclusively to Scotland, be referred to the Scottish Grand Committee.—[Mr. Lennox-Boyd.]

Public Expenditure
4.49 pm
The Chief Secretary to the Treasury (Mr. Peter Rees): I beg to move,
That this House takes note of the White Paper on the Government's Expenditure Plans 1985–86 to 1987–88 (Cmnd. 9428).
Mr. Speaker: I should announce that I have selected the amendment in the name of the Leader of the Opposition.
In view of the late start of the debate, I shall have to apply the 10-minute limit on speeches between 7 pm and 8.50 pm. If hon. Members make relatively brief speeches, it may be possible to relax that limit.
Mr. Rees: This is only the second occasion on which I have had the privilege to commend to the House the annual public expenditure White Paper, but that brief experience has taught me that only an incurable optimist would expect this annual document to be received with rapturous acclaim. Therefore, I approach my task with, I hope, suitable diffidence.
As has become customary, the House has the benefit of a detailed report on the White Paper from the Select Committee on the Treasury and Civil Service. I am delighted to see my right hon. Friend the Member for Worthing (Mr. Higgins), the Chairman of the Select Committee, in his place and I hope that we shall have a notable contribution from him. I am sure that the House will, once again, find the Select Committee's report a valuable contribution to our debate.
The Select Committee made a number of criticisms, with which I shall attempt to deal during my speech, but it has been good enough to acknowledge a number of changes and improvements introduced in this year's White Paper. I should emphasise that many of those changes were made in response to the Committee's recommendations last year. Our aim has been to improve the intelligibility and clarity of the document. I shall certainly not claim that we have reached perfection, but I hope that we have made certain advances.
On the policy background to the expenditure plans set out in the White Paper, our aim, which has been consistently followed since 1979, is prudent financial policies, a sustainable level of public expenditure and a reduction in the level of public borrowing.
I look forward to hearing the contributions of hon. Members, and particularly that of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), because I waited in vain during our debate on the autumn statement for a statement from him on what level of expenditure he would plan for and how he would finance it. I also understand that the country has been privileged to hear the advance Budget of the alliance, and I hope that the hon. Member for Colne Valley (Mr. Wainwright) will elaborate on those proposals.
The Government have demonstrated their willingness to face the implications of a rigourous public expenditure target. The White Paper also demonstrates the commitment that we have shown, and will continue to show, to certain sensitive areas of public spending. The social security programme has been more than maintained and, with increased take-up and demographic changes, is expected to increase. The health and social services
678
programme will be broadly maintained in real terms, and the job creation schemes of the Manpower Services Commission and the Department of Employment are being maintained.
However, we have also been prepared to identify the areas of spending, such as the provision of subsidies to industry and agriculture, which should be pruned back, and the expenditure on public sector housing—
Mr. Nicholas Budgen: Is my right hon. and learned Friend making a new announcement about the subsidies given to agriculture? Can we expect him to apply to farmers the same harsh logic that has been applied to the miners?
Hon. Members: Hear, hear.
Mr. Rees: The interesting analogy that my hon. Friend draws has received enthusiastic applause from the Opposition. It would divert me from my main theme if I were to make the various points of distinction which can be observed from the Government Benches. I have to disappoint my hon. Friend. The decisions have been announced by my right hon. Friends responsible for the Departments involved. The conclusions are drawn together in the White Paper and I am sure that if my hon. Friend is called to speak he will be able to amplify his imaginative proposals for economies in these areas.
Mr. Tony Marlow: Will my right hon. and learned Friend give way?
Mr. Rees: I appreciate the keen concern that my hon. Friend shows in these matters, but perhaps he will allow me to get a little deeper into the debate. I shall then give way to him.
Following the rapid growth in spending on defence up to 1985–86—an increase in real terms of, on average, 3 per cent. per annum, which is in line with our NATO commitment—we are planning to consolidate in later years.
I make no secret of the fact that important factors in our plans are the targets set for the nationalised industries. Their plans for total external finance show a fall from £3·21 billion in 1984–85 to minus £110 million in 1987–88. It has been suggested that that shows a measure of optimism verging on unreality and that such targets could be achieved only by insensitive and insupportable price increases.
That opens up a debate about the role that we see for our nationalised industries and reopens the debate on what return we expect on the enormous investment of public money that has been made over the years. After all, even in the private sector, the investor expects a return.
I take my stand on the White Paper produced in 1978 when the right hon. Member for Sparkbrook was Minister for Prices and Consumer Protection and the right hon. Member for Chesterfield (Mr. Benn) was Secretary of State for Energy. That White Paper suggested as the norm a real return of 5 per cent. on the investment programmes of nationalised industries. That seems a practical and sensible contribution to our thinking on this matter, and I hope that the right hon. Member for Sparkbrook will confirm that that view is still the policy of the Labour party.
Mr. D. N. Campbell-Savours: In the Select Committee on the Treasury and Civil Service last year, the Chief Secretary refused to address himself to the

679
effect of the miners' strike on external financing limits. Is this not the opportunity for him to make a full statement about the effects of the strike this year and during the coming financial year? Surely the historian has a right to know what that strike cost the nation. Will the Chief Secretary make that statement and let the country know?
Mr. Rees: I am coming, as far as I can, to the consequences of the miners' strike. The right hon. Member for Chesterfield said that history would be written sooner than we care for, but we are still rather in the middle of things. I am flattered that the hon. Member for Workington (Mr. Campbell-Savours) should think that within 24 hours of the conclusion of the delegates' conference we could see through and evaluate all the consequences of that great industrial turmoil.
Mr. Campbell-Savours: Will we get the figures in the end?
Mr. Rees: I am coming to that point. The hon. Gentleman may not be fully satisfied today, but we will do our best to satisfy him over the coming weeks, and I am sure that my right hon. Friend the Chancellor of the Exchequer will do his best to satisfy the hon. Gentleman in about two weeks' time.
Mr. Mark Fisher: Will the right hon. and learned Gentleman give way?
Mr. Rees: No. If I had known that the hon. Gentleman was about to intervene I would have given way to him, because he pressed me on this matter in the Treasury and Civil Service Select Committee last year. If he will allow me to continue, I shall do my best to give way to him later if he is still dissatisfied. I wish to move on from this emotive subject.
Our critics seem to take scant account of the savings which increased efficiency could generate in nationalised industries. Savings of between 3 and 5 per cent. per annum are commonplace in the private sector. Is it too much to expect the same in the public sector?
On the question of prices — ultimately it is for the boards of nationalised industries to set prices consistent with their targets—we have the statement of Sir Denis Rooke that the British Gas Corporation can achieve its targets by prices level with, if not slightly lower than, the rate of inflation. Similar statements have been made by the chairmen of the electricity supply industries.
Mr. Austin Mitchell: What about the water industry?
Mr. Rees: I am coming to that.
Mr. Anthony Beaumont-Dark: May I help my right hon. and learned Friend?
Mr. Rees: I am always grateful for assistance from my hon. Friend. I noticed his slightly highly charged statements at the press conference after the publication of the important report by the Select Committee on the Treasury and Civil Service.
In response to the hon. Member for Great Grimsby (Mr. Mitchell), I should add that I was just coming to the question of water. One exception will, of course, be the water industry, but those who press for increased investment in the infrastructure, and particularly in what they describe—with a degree of universality which is
680
not quite justified and which would not be seen as such, I believe, by Mr. Roy Watts—as collapsing sewers and leaking water mains, cannot in the same breath complain if the water authorities' targets envisage an increase of 10 per cent. in their capital programmes to be funded by increased prices. I can understand that the right hon. Member for Sparkbrook may feel a moment of unease when he addresses himself to such matters, particularly as he was once Secretary of State for Prices and Consumer Protection. He will recall that between May 1979 and the end of 1984 electricity prices to the consumer, for example, rose by 16 per cent. in real terms, but that they rose by 27 per cent. under the previous Labour Government.
I turn to the question of capital spending and infrastructure.
Mr. Beaumont-Dark: I am aggrieved that my right hon. and learned Friend should have thought I made a slightly charged statement at the press conference. It was only meant to be helpful to the consumer. My right hon. and learned Friend has set himself the target of reducing £3 billion of external financing limits to a positive £110 million over a very short period. Last time that target was set, there was an utter failure to reach it. Without those milch cows of water, gas and electricity paying more than the rate of inflation, how can the figures come right? Does my right hon. and learned Friend accept that the method of accountancy adopted to arrive at the figures sought has been called the accountancy of Bedlam by respected members of the accountancy profession? How can it be right to use that system of accountancy to arrive at such figures when everybody, with the exception of the Minister's advisers, considers it daft?
Mr. Rees: My hon. Friend has taken the statements of members of the accountancy profession when they were uttered in a slightly different context.
Mr. Beaumont-Dark: I spoke to them.
Mr. Rees: My hon. Friend may well be fortunate enough to catch your eye later, Mr. Deputy Speaker, but those statements were made when the accountancy profession was considering a change in methods of accounting, although not particularly in relation to the nationalised industries. If my hon. Friend wants to try to demonstrate that Sir Denis Rooke and the chairman of the electricity industry are wrong, we shall pay the closest attention to his speech.
My hon. Friend said that the targets had not been achieved, and of course it is true that the Central Electricity Generating Board, British Rail and the National Coal Board have been affected by the industrial action of the past 12 months. My hon. Friend is apparently saying that we will face a similar cataclysmic occurrence during the next 12 months, and I agree that if that happened we would have to reconsider our public expenditure plans. However, I am not quite such a pessimist as he clearly is.
I turn again to the question of capital spending and the infrastructure. As The Times perceptively remarked last Friday, "infrastructure" has become the political buzz word of the 1980s. I suspect that many of the contributions to the debate generated on this subject are more of a thinly veiled plea for more public expenditure than a critical analysis of what the infrastructure requires. I was much pressed by the Select Committee on whether we could

681
have a comprehensive review, or a sort of Doomsday survey, setting out the value of all public expenditure assets and the proper rate of appreciation. But if the House reflects for a moment it will recognise that public expenditure assets cover a wide and heterogeneous area which includes the Tower of London and the Treasury building, and will recognise some of the practical difficulties involved in such an exercise.
The truth is that there is no absolutely correct aggregate level of capital spending, that each project must be assessed on its merits — as it is — and that the total investment in the economy, running at £55 billion this year, has never been higher, and is still rising.
The debate on the level of infrastructure spending highlights the importance of assessing the outputs obtained from public spending. I hope that in this debate we can move away from the crude assessment of a Government's or a Department's performance in any public activity by the amount of a cash thrown at an objective. As a distinguished 19th century legislator observed some years ago:
"Large increases in costs with questionable increases in performance can only be tolerated for racehorses and fancy women."
So far as I am aware, I have no ministerial responsibility for either of those interesting areas of human endeavour.
The Government are firmly committed to planning the inputs to public expenditure in cash terms. What we spend must be determined by what cash resources are available. Where volume is important is in relation to public spending outputs. The Treasury and Civil Service Committee, if I may say so, is absolutely right to draw attention to this issue. Increasingly, all those involved in the planning and control of public spending must first clearly define their aims and objectives—what they are trying to achieve—and then focus on how effectively and efficiently scarce resources are being used to meet those targets.
For example, much more is being achieved by the National Health Service. In 1983, 9,000 more inpatients a day were treated than in 1978. That is set out in the White Paper. The output of first-degree graduates has risen from 81,000 in 1979 to an estimated 101,000 in 1984–85, including a more than proportionate rise in science graduates. I hope that my old university, Oxford, took full account of those figures in its recent debates. Administrative efficiency is improving and there have been, for example, lower unit costs in social security administration. That is set out in a table in volume II of the White Paper. Those are just a few specific examples of what has been achieved, and they represent an indication of the general trend that must continue.
Most of these examples are drawn from central Government. Local government in general — and of course there are shining exceptions — has been less successful in getting value for money. Expenditure has risen by nearly 10 per cent. in cost terms since 1979, largely because of excessive pay settlements. Manpower has fallen by only 4 per cent., compared with 14 per cent. in the Civil Service.
Critics of the White Paper have pointed out that public spending has continued to rise in real terms since 1979—particularly if one makes a number of adjustments to the public expenditure planning total figures which some people favour. We can have an interesting if somewhat technical debate about the figures which should, or should
682
not, appear in the planning total. However, I suspect that at the end of the day this debate is more about presentation than substance, particularly if, as I said in my evidence to the Select Committee, the figures are presented clearly and consistently, as I hope they are in both volumes of the White Paper.
I would be the first to concede the continuing difficulties of containing public expenditure. However. I derive some comfort from the fact that although over a 20-year period public expenditure has risen by 3 per cent. per annum on average, it has risen by only 1·5 per cent. since 1979. I also readily acknowledge that there are substantial uncertainties in some areas, particularly bearing in mind that the White Paper figures were finalised in December. Life does move on. The coal strike and its aftermath are the most conspicuous example, and of course I was much pressed on that when giving evidence to the Select Committee.
The White Paper explicitly draws attention to the need to review the position at the end of the strike, and that we are doing. Costs are certain to be higher than those assumed in the White Paper, which had to be based on the assumption of a conclusion at the end of 1984. In two weeks' time my right hon. Friend the Chancellor of the Exchequer will present his Budget proposals to the House. As I made clear when giving evidence to the Select Committee, he will seek to provide an updated assessment of the cost of the stike.
Mr. Fisher: Does the right hon. and learned Gentleman recall that, in evidence to the Select Committee, his Treasury officials agreed that they had the figures but that they were not allowed to publish them? Will he explain why, if he had the figures, he did not publish them, and why he does not publish them now?
Mr. Rees: The hon. Member misrepresents the position. We gave figures before Christmas on the basis of an end to the strike at the end of the year. We could have made tentative estimates of what the costs were likely to be, but it would not have assisted the debate if we had given tentative figures at fortnightly intervals. Now that the strike is over, we cannot accurately predict the consequences. Mr. Scargill has talked about guerrilla activities. We do not know how long it will take to shore up some of the faces and to pump out the pits. We do not know how long it will be necessary for the CEGB to continue with oilburn. These matters will have to be determined coolly, and in due time we shall give the House a proper estimate of the costs. The most up-to-date figures will be given at Budget time in two weeks.
Sir Kenneth Lewis: When assessing the cost of the miners' strike, I assume that the Treasury will work out how much has been lost in income tax. Will my right hon. and learned Friend be able to tell the House whether Mr. Scargill and Mr. Heathfield have taken their salaries for the last year? Since they are paid on a yearly basis, they could take their salaries in full between now and 4 April. May we be told whether they do that?
Mr. Rees: That is an interesting question, but whether they take their salaries is a matter for them and their union. I would not be permitted to see their tax files even if I were curious about their tax affairs.
As part of the normal preparation for the run-up to the Budget and the associated updating of the medium-term

683
financial strategy, it is necessary to review the prospects for expenditure as well as for revenue and borrowing. This year the review will have to take into account a considerable range of uncertainties, with the developments over the past two or three months. We shall need to review the White Paper figures against that background. I am sure that the House would not expect me today to try to anticipate what my right hon. Friend the Chancellor will have to say on 19 March.
Another area of uncertainty which the Select Committee identified is local authority expenditure. I make no complaint of its concentrating on that. Local authority expenditure is an integral part of total public expenditure. It accounts for about £38 billion out of a planning total of £130 billion. More than a quarter of total public spending is by local authorities. The Government cannot, in a unitary state, be indifferent to what is spent. If central Government think that local expenditure is threatening national objectives, they are bound to act.
As the Select Committee observed in paragraph 36 of its report, we have had to revise our estimates of local authority expenditure for the current year, 1984–85, upwards by about £2 billion. A total of £1·2 billion is on account of current expenditure, and £700 million on account of capital expenditure. That is why we have had to tighten current spending.
Councils which exceed their targets will in future face a more severe holdback of grant. That is why we have had to introduce rate capping. To put the problem in perspective, the 18 authorities which my right hon. Friend the Secretary of State for the Environment has designated for rate capping last year accounted for 75 per cent. of total overspend. Profligacy of that order affects not only domestic ratepayers, but commercial and industrial ratepayers. It affects jobs.
That is also why we have had to tighten up on the existing system of control of local authority capital expenditure. Where there was an underspend in previous years, as there was in 1981–82 and in 1982–83, we rightly encouraged spending up to the control figure. In 1983–84 there was an overspend of about £400 million, and in the current year, as the Select Committee observed, there is likely to be an overspend of between £600 million and £700 million.
The tightening of existing controls — I emphasise again that there has been a system of control on this basis since the 1980 Act, and we shall debate the orders next week — is designed simply to ensure that the gross capital spending figure of £5 billion, which is no small figure, will not be overspent as it was in preceding years.
As my right hon. and hon. Friends have emphasised, this system of control does not deprive local authorities of moneys raised from the sale of assets. It is, and always has been, designed to regulate the rate at which capital expenditure is incurred by reference to current and past receipts. Again, as my right hon. and hon. Friends have emphasised, there is an overhang of £5 billion of accumulated receipts. That does not mean, however, that local authorities in the aggregate have £5 billion of accumulated cash or liquid assets.
With respect to those of my hon. Friends who have put their names to early-day motion 283, the Government do not and could not share the relaxed view that they appear
684
to take about the macro-economic impact of allowing uncontrolled capital expenditure on anything like this scale.
Without the tightening of the present system of capital controls which we are proposing there would be a risk of a substantial increase in local authority expenditure above the amounts for which we have planned and allowed. I emphasise that a potential overspend running into hundreds of millions of pounds could not fail to have a major impact on the Chancellor's budgetary policy.
Mr. Michael Forsyth: I apologise for interrupting. I fully understand my right hon. and learned Friend's arguments, and I support him, but I am puzzled why local authorities in Scotland are being allowed to spend all their receipts from local authority housing and why there is no control of rate spend.
Mr. Rees: I am sure that my hon. Friend has made a close study of these matters. The position north of the border is slightly different. Local authorities are allowed to spend only their in-year receipts. A different control system operates in a different fashion. In Scotland there is no problem about the overhang of accumulated receipts.
It would have been naive to expect the official Opposition to approve of the White Paper, but their amendment hardly sets out a factual basis for their disapproval. The basis of almost every point that they single out is plainly wrong. They single out unemployment. They appear to overlook the fact that in the 18 months to last September employment increased by nearly 500,000. They single out investment, but business investment increased by 12 per cent. in 1984 to reach an all-time high.
In their amendment the Opposition point to damage to industry, but the gross domestic product is at its highest ever level and has increased every year for the past four years. They refer to housing, but private sector completions last year were the highest for nearly 10 years. They glanced at the infrastructure, but total investment is currently at record heights.
The amendment talks of increased fuel prices, but gas and electricity prices are not expected to rise in real terms, as the chairmen have made clear. The Opposition suggest an attack on the living standards of the unemployed, the sick, the disabled and the poor, but all the main social security benefits are higher in real terms than they were when this Government took office.
All this is cheap rhetoric, more appropriate to a Labour party conference than to a serious debate on public expenditure. I hope that the right hon. Member for Sparkbrook will throw away his prepared speech and make the thoughtful contribution of which we know he is well capable.
It is no secret that the business of controlling public expenditure has been, is, and will remain an arduous and thankless task. Looking back, I remind the House of what Lloyd George said in a Budget debate. He said:
"The path of the economist"—
he was using the term broadly, and I would not claim to be an economist—
"is hard. His is not a very attractive or popular role in any Government."—[Official Report, 29 April 1909, Vol. IV, c. 501.]
I sometimes think that in considering the problems thrown up we pay insufficient attention to the way in which similar problems are faced abroad. I commend, for

685
example, to the official Opposition the lessons to be learnt from the stern measures taken in France and Spain by parties which they regard, no doubt, as on the same side of the political spectrum as themselves.
To the House as a whole, I commend the current debate in Washington. The United States is, after all, the single most powerful economic unit in the world. We are sometimes encouraged by hon. Members on both sides of the House to follow the American example and take a more relaxed view of the public deficit. I refer them to some wise words of Mr. Paul Volcker. In his evidence to the Joint Economic Committee of Congress on 5 February he said:
"The answer most fundamentally is that economic analysis and common sense coincide in telling us that budgetary and trade deficits of the magnitude we are running, at a time of growing prosperity, are simply unsustainable indefinitely … The hard fact is that the budget deficit, on top of the private investment needed to support growth and productivity, outruns our internal savings potential … In that real sense we are living beyond our means … The resulting imbalances and financial strains generate political pressures here and abroad for counterproductive protectionism, for economic nationalism and for excessive money creation that would, if implemented, undercut and jeopardise all the progress we have made."
The aim and object of Her Majesty's Government is based not on monetary dogmatism—if it were, I confess that I should not qualify as a prize pupil of Professor Friedman — but on economic analysis and common sense. To use Paul Volcker's words, we should live within our means so as not to set up political and economic strains which experience under Administrations of both colours shows we cannot support. We do not propose to undercut or jeopardise the progress that we have made.
The White Paper that I have presented to the House is a blueprint for living within our means in the next three years. On that basis, I commend it to the House.
5.22 pm
Mr. Roy Hattersley: I beg to move, at the end of the Question, to add:
"but deplores the fact that the Government's Expenditure Plans compound their errors of previous years and will further worsen unemployment, inhibit investment, inflict additional damage on industry, further exacerbate the severe shortage of adequate housing in many parts of the country, prevent necessary improvements in public services and in the economic and social infrastructure, increase fuel and water prices, and make further attacks on the living standards of the people in this country, particularly the unemployed, the sick and disabled, pensioners and families living in poverty."
Predictably, the Chief Secretary advanced to the House, in a slightly more oblique way, the assertion that he made so boldly at the press conference with which he launched the White Paper — that the Government's spending plans are on course and that the achievement of those plans and adherence to them is the certain way to achieve economic growth.
Anyone who has looked at the plans will know that the right hon. and learned Gentleman was wrong in both particulars. The Government's spending forecasts have been wrong in four out of the past five years. Indeed, as the Select Committee, to which I pay tribute, points out, the Government have been driven into boasting not that their forecasts have proved correct but that they have stuck to their forecasts right up to the moment when they were proved wrong.
However, much more disastrous than the errors in forecasting, which are simply a matter of incompetence, are the Government's concepts on which the White Paper
686
strategy is based. The White Paper's strategy, like the wider economic strategy of which it is a part, is fundamentally wrong.
The White Paper should contribute to the plan for jobs — the strategy for greater employment — whereas it contributes directly, and I believe intentionally, to the creation of additional unemployment. It cuts capital spending and local authority spending, and it cuts Civil Service numbers. Each of those reductions will result in a loss of jobs.
Last year's White Paper sacrificed, it is estimated, 175,000 jobs. This year, according to the construction industry alone, the consequences of the White Paper will be a 60,000 reduction in jobs in building. The local authorities calculate that the reductions in teachers' numbers, which the White Paper will require if its forecasts are to be turned into reality, will add another 40,000 redundancies to the total.
The White Paper is part of the strategy which has increased unemployment in Britain by 2 million in the last five years, with a total cost to the Exchequer of £12 billion. The total cost to the Exchequer of the increase in unemployment in the last five years now amounts to our annual revenues from North sea oil. Of that annual sum, £4 billion is directly within the White Paper, not as a loss of income to the Treasury through the denial of income tax which would have been paid by men and women at work, but £4 billion a year that must additionally be paid to meet the growing unemployment bill.
While the Government prefer to invest in unemployment rather than in jobs, not only will the economy decline but—this may be less important in general, but it is specific to the debate — the Government's public expenditure forecasts will constantly be wrong, for the combination of prejudice and ignorance which now passes as economic policy is bound to result in sudden cuts in public expenditure which, by generating more unemployment and decreasing overall economic activity, will impose additional burdens on the public expenditure budget.
The most eloquent example of that is to be found in the coal dispute, which I hope ended today. That dispute, on an honest calculation, has already cost the country £3·5 billion. The Government spent that money to ensure that they had the freedom to destroy jobs in the coal mining industry—[Interruption.] I see the Chancellor smiling in his normal smug fashion, no doubt saying that he still believes that the £3·5 billion that the dispute has cost is a good investment for the nation.
If we can afford £3·5 billion this year to fight the miners, why can we not afford £3·5 billion next to fight unemployment? The answer—though I do not expect the Minister of State will give it — is that fighting unemployment is not one of the Government's priorities.
Mr. Tim Yeo: Is the right hon. Gentleman saying that his policy would have been to give in to the violent demands of Arthur Scargill? If so, how many billions of pounds does he think it would have cost to solve the double level of unemployment that would have resulted?
Mr. Hattersley: I give the hon. Gentleman three immediate answers. Had we applied—as we would have done had we been the Government—proper procedures over pit closures, there would have been no Cortonwood

687
and no dispute—[Interruption.] Secondly, had we come to office in the middle of the dispute, we would have sought to end it rather than, as the Prime Minister has done, prolong it. Thirdly, whatever is the cost of keeping uneconomic pits open, it is nothing remotely like £3·5 billion in a full year, and nobody can begin to pretend otherwise.
The miners' strike demonstrates that the Government's ill-considered attempts to cut expenditure have managed only to cut desirable expenditure and promote, in its place, undesirable expenditure, year by year. As a result, despite the boasts and promises—
Mr. Tim Eggar: Will the right hon. Gentleman give way?
Mr. Hattersley: The boasts and promises—
Mr. Eggar: Will the right hon. Gentleman please give way?
Mr. Hattersley: It is no good the hon. Gentleman pleading with me. Winsome though he is, I propose to finish the sentence. I do not want to under-estimate the hon. Gentleman's winsome characteristics.
Despite the boasts and promises that the Government have made at successive general elections, public expenditure has risen in real terms by 9·4 per cent. since they came to power. If asset sales are excluded, the rise is 12·6 per cent. In 1979, when the Conservative party formed a Government, public expenditure accounted for 39·5 per cent. of national income. It is now 42·5 per cent. The Government's ambition is to reduce the level of public expenditure by 1987–88 to that which they inherited five years ago. The Government have managed to contrive simultaneously to increase the level of public expenditure and to reduce the level of public services. This is an act of economic ingenuity which was thought to be impossible before the Government's election.
Mr. Eggar: When I tried to interrupt the right hon. Gentleman earlier he was saying that the Government had differentiated between desirable and undesirable expenditure. I understand that expenditure on current items has increased, especially on social security.
Mr. Robin Corbett: That is because of unemployment.
Mr. Eggar: No. If unemployment-related social security benefit expenditure is excluded, social security expenditure has increased. Is the right hon. Gentleman saying that that is undesirable social expenditure?
Mr. Hattersley: I am not sure whether the hon. Gentleman came in late or was day-dreaming two or three minutes ago. The point that I made is one that he has made inadequately and incompetently. The desirable expenditure that the Government have reduced is, for example, investment in construction generally and housing especially. As a result of that undesirable cut, the undesirable expenditure that is incurred is the unemployment bill that is made necessary by extra building workers being put on the dole. It cannot be repeated often enough that the extra unemployment bill, which arises because of 2 million additions to the unemployment total, created by the Government, is about £4 billion.
Mr. Eggar: Will the right hon. Gentleman give way on that very point?
Mr. Hattersley: No, I shall not give way to the hon. Gentleman.
Mr. Eggar: Come on.
Mr. Hattersley: The hon. Gentleman has got it wrong once and I am not giving way to him again. I shall continue repeating, and so will the Opposition, that by their decision to cut projects which would have generated jobs, the Government automatically create for themselves other expenditures. That is why they have produced public expenditure forecasts in four years out of five which have borne little reality to the outturn one, two, three or four years afterwards.
The additional problem which the House must understand — I wish that the Chancellor of the Exchequer understood it — is that setting targets, insisting that reductions in public expenditure are essential to the economic well-being of the nation and then consistently failing to meet the targets which the right hon. Gentleman has described as essential, is doing appalling damage to international confidence in Britain. We should not be surprised that there is speculation against sterling when the Chancellor constantly fails to achieve what he describes as being economically essential. The Prime Minister constantly denigrates the structure and organisation of the British economy. The combination of a Prime Minister who sells Britain short and a Chancellor who falls over his own feet—
Mr. Neil Kinnock: The right hon. Gentleman cannot see them.
Mr. Hattersley—is lethal to international confidence.
Despite the obvious errors of the past, the Chief Secretary made a categoric promise at the press conference at which the White Paper was launched that the Government would continue pursuing their strategy "constant and unchanged". I fear that he was right to make that promise, but I shall recall what the strategy has produced. This is the strategy which the right hon. and learned Gentleman reassures us is to be continued. The strategy, which is to continue unchanged, has produced the highest level of unemployment in Britain, the highest real interest rates, the highest tax rates, the highest rate of sterling depreciation in our history, the highest deficit in manufactured trade and the highest number of liquidations in our history. The comforting message that the right hon. and learned Gentleman gives us in the light of all that is, "Do not worry. Nothing will change." The Gadarene swine reassure themselves that they are running to the cliff in an absolutely straight line. That may be of some consolation to the Chief Secretary, but not to others.
The errors in the Government's public expenditure calculations are based on a self-perpetuating failure which destroys their forecasts the moment that they are made. First, the assumptions on which the forecasts are based are patently absurd. I told the right hon. and learned Gentleman last year that his forecast assumptions were implausible. I warned him then that the assumptions about local authority spending, public sector pay, unemployment and nationalised industry external financing could not be justified and would not be achieved. In the event, none of them were achieved.
The assumptions on which the White Paper is based will be proved wrong again. Indeed, the assumptions are

689
even more inaccurate this year than last. The inflation assumption for May, on which the upgrading of pensions and other benefits is to be based, is already overtaken, already wrong and already an under-estimate, although May is only about eight weeks away. The White Paper tells us that the upgrading will be based on an assumption of 4·75 per cent. inflation. We know already that that figure is to be exceeded. Next year's contingency reserve is already being reduced, two months before the financial year for which it has been provided.
I hope that when the Minister of State replies he will make clear what the inflation forecast now is for May and how much that already inflates the amount necessary for pension and benefit upgrading. I hope too, that he will make it clear that the new figure, which vitiates the White Paper forecast already, is to be properly honoured and that the rumours that we have heard and read about in newspapers—that the inflation updating may have to be abandoned because of the size of the error — are no more than rumours. What is more, I hope that the Minister who replies will tell us something about the real forecast for local authority spending. It was assumed last year that there would be a reduction of £1·9 billion, but there was not. There was to be a 13 per cent. cut, but that was not achieved. Indeed, local authority spending was substantially greater than that for the previous year, despite the 13 per cent. reduction which the Government estimated, forecast and predicted.
Local authority spending this year is said to be likely to fall by £1 billion. The councils have lost £12·4 billion in rate support grant since the Government came to power and they cannot make cuts next year of £1 billion. I believe that the Chief Secretary knows that. The local government spending forecast is either a negotiating posture to assist the Secretary of State for the Environment in his annual dispute with local authorities or it is a further episode in the campaign to erode local democracy and the power of the councils. In short, the forecast for local authority spending is intentionally too high and is intended to be broken. I hope that the Minister who replies to the debate will tell us what he really believes the increase or reduction in local authority expenditure is likely to be. If he persists in saying that he expects a reduction of the size specified in the White Paper, I hope that he will tell us why he believes that, in this year alone as distinct from all the other years when a forecast of that extent has been predicted, it can be achieved.
Thirdly, I hope that the Minister will explain his exact intentions with regard to public sector capital investment. This year, when virtually everyone in the country is demanding additional investment in the infrastructure, the Government propose a massive reduction in public sector capital spending. Between now and 1987–88, the Government propose to cut capital spending by £2·5 billion, or £4 billion if the figure for defence capital is removed from the total, as it should be. The figure for defence capital, which is not included in the statistics provided by our competitors in OECD, is inserted simply in order to make the cut in capital spending look more acceptable. The inclusion of that figure is clearly nonsense.
I should like to ask the Minister of State a specific question about the inclusion of defence capital. It was reported in The Sunday Times that in order to pad the figures and make the reduction in capital investment look less extreme, every possible item of defence capital has
690
been included — even the cost of the Trident programme, most of which is to be discharged in the United States. Is that true? Perhaps the Chief Secretary, who carries such matters in his head, can tell me now whether the Government are so embarrassed about the capital cuts that they have had to pad the figures by including an item of capital expenditure that will not even be invested in this country. If the answer is yes, as I suspect it is, the capital cut is of nearly £4 billion. If the answer is no, the cut is still of well over £3 billion, and it is made at a time when there is, properly, a growing demand for increased investment in our decaying and dilapidated sewers, roads, housing stock, hospitals and railways, and all the other infrastructure items to which the report by the National Economic Development Council drew attention.
The report did not just point out the obvious need for investment in the infrastructure. It emphasised the fact that failure to invest now would result in further dilapidation and, in some cases, collapse, and that unless we spend some money now, future generations will have to spend much more. Investment in the infrastructure is financially prudent, economically necessary, and a certain way to create jobs. Nevertheless, the Government choose not to increase capital spending but to cut it dramatically.
Within the capital totals, the assault on the construction industry is barely comprehensible. The Government propose that spending on public sector housing should fall from £3 billion this year to £2·3 billion in 1987–88, despite the massive fall in public sector starts and completions, and in the number of public sector houses under construction, in the life of the present Government.
The Chief Secretary claimed today, as he always does, that our complaints about the loss of jobs that flows from cuts in capital spending in the public sector and in housing in particular are misconceived, because the gap is being filled by improvements and investments in, and extensions to, the private house building programme.
I hope that the chief Secretary is listening to me. For his benefit, I repeat what I have said. He constantly rebuts our claim that employment is being sacrificed by cuts in the public sector house building programme by saying that the cuts are being made up in the private sector. That argument is wholly unsustainable.
In 1978, the last full year of the Labour Government, there were 264,000 public and private starts. The figure has now fallen to 190,000. A reduction of 70,000 in the number of starts each year makes a massive difference to the number of men and women employed in the construction and ancillary industries. The claim that the gap is being filled by private enterprise must be the product of either ignorance or intentional deception. The assault on the house building programme is an assault on jobs.
That assault becomes even more unacceptable when local authorities have the money to build the houses. The local authorities have about £5 billion of capital that they were led to believe was theirs to invest in new projects and developments. After the autumn statement was made, I asked the Chief Secretary why he believed that the proceeds of the sale of council houses would automatically result in more investment in the public sector. The right hon. and learned Gentleman brushed aside the idea that there would not be such a result. The idea that it might be prohibited by the Government had clearly never struck him at the time. It should not have struck him or his colleagues since that time.

691
If the Chief Secretary wishes to contend that there has not been a wilful refusal to provide the investment that would have produced the jobs, he must give a much more convincing reason why local authorities who sold their houses, being encouraged in the belief that they could use the money for useful investment, should now be prevented from making such investment simply as part of the obeisance to the absurd doctrine of holding down the pubic sector borrowing requirement.
Mr. Peter Hordern: The right hon. Gentleman will recognise that in the latest housing survey the criticism of the nation's housing stock is that it is in poor condition and therefore needs much more repair and maintenance. How does he explain the fact that in the last year of the Labour Government only 70,000 grants were made to private owners to enable them to improve their houses, whereas last year 250,000 grants were made and far more money was spent?
Mr. Hattersley: I will say what the hon. Gentleman is longing for me to say—that last year the Government did far better than the Labour Government in their last year of office. However, the point that is relevant to the present debate is that next year and in the following year the Government's performance will be infinitely worse than in any one of the past 10 years. If the hon. Gentleman holds the beliefs that a brief look at his book suggests that he holds, he should be complaining about the cuts to be made in the Government grants next year and in the year after that. The Government are cutting those grants because of one of the basic fallacies underlying their economic policy, which is that economic redemption can be achieved through the constant contraction of the economy. That policy produces attempts to cut the PSBR by sudden and ill-conceived reductions in specific programmes.
Mr. Marlow: Will the right hon. Gentleman give way?
Mr. Hattersley: I shall not give way at the moment.
As the slump deepens, the amount required for unemployment benefit increases, tax revenues are lost, the oil revenues are dissipated, the pressure on the PSBR continues and the dreary round goes on and on.
The second fallacy underlying the Government's policy is the continued belief that somehow they can hold down inflation by increasing prices. This year's White Paper demonstrates the Government's wilful decision to push up the charges made by nationalised industries.
The Select Committee's comments on public sector prices are explicit. Referring to the Government's intention to use nationalised industry finance to affect public expenditure, the Select Committee concludes:
"If these targets are to be realised, it seems likely that the nationalised industries will resort to using their monopolistic power to raise prices".
It is extraordinary that, despite the slightly extravagant compliment that the Chief Secretary paid the Select Committee, he did not feel able to make a judgment on either of those two points. The truth of them is overwhelming and their force cannot be denied. The Government intend to enforce public sector prices increases above what the industries need and want to the point at which they will do something that is coyly described as providing 1·5 billion of negative borrowing.
692
To many people, negative borrowing will sound like positive lending — positive lending enforced by the Government to use the nationalised industries as a surreptious means of raising taxes.
The nationalised industries, gas and electricity in particular, are likely to make what by normal commercial standards would be called a profit next year, which is to be creamed off and used for a tax. If, in the Budget in 14 days' time, the Chancellor decides to impose VAT on gas and electricity, he will be charging 15 per cent. tax on what is already in part another tax. He intends that those industries should contribute to the public sector borrowing requirement exactly like a tax. It is a tax, especially as applied to the water industry.
Although appearing superficially to deal with the water industry, the Chief Secretary failed wholly to deal with the point to which the Select Committee has drawn our attention and which has been underlined and repeated by the Confederation of British Industry. Knowing a little about the Chairman of the Select Committee, I suspect that he would regard it as more of a courtesy if the Government abandoned the extravagant compliments and dealt with the point that he is trying to make—in regard to the water industry, with considerable effect.
The Select Committee takes the water industry as its example of extravagant and unreasonable financial attitudes towards nationalised industry, for the simple reason that it is to be required to finance all future investment out of revenue. Why has the Chief Secretary not thought it necessary to justify that extraordinary decision? Why are he and I, and other middle-aged men like us, required from our water revenues to finance investment for next year and 20 years' time? The concept has only to be described to be understood to be ridiculous. The Select Committee and the CBI realise that it is ridiculous. The latter reported in its bulletin one month ago that water charges are set to rise by an average of 12 per cent. and in some areas will rise by 20 per cent. or more and concluded:
"at a time when local authorities are being urged to cut local rates, the authorities are being pressed to raise water rates in what is clearly a tax-gathering operation".
The CBI is opposed to it, the Select Committee drew our attention to it and the bold Chief Secretary cannot bring himself to say a word about it. I hope that, in that particular, the Minister of State will make up for the Chief Secretary's deficiencies.
Mr. Marlow: Perhaps the right hon. Gentleman could take himself back a couple of paragraphs to when he was saying that local government had £5 billion which could be spent on capital but which the Government would not let it spend in that way. Does the right hon. Gentleman believe that local government will stick that money under the mattress, or is it possible that the money might be lent to financial institutions that would then on-lend the money for the creation of wealth and jobs in other sectors of the economy?
Mr. Hattersley: I should be glad if that happened but, if the money were lent to institutions, some of it would be exported for investment in other people's jobs in other countries. It is perhaps more certain that it would not have the same job creation force as if it were invested in construction. We know from all the studies and all the

693
surveys that investment in construction is the best and most certain way in which to create jobs. That is what the White Paper ought to be concerned with.
I should like the Minister of State to make up for some other deficiencies in the Chief Secretary's presentation by answering questions that to us seem central to the White Paper, but which, for some reason about which we can only speculate, the Chief Secretary did not think it right to comment on. Do the Government still support the view which was reported to them by the Central Policy Review Staff that for the Health Service to maintain its level of service, allowing for demographic change and medical advance, it must increase its spending by about 1 per cent. or 1·5 per cent. a year simply to stand still? If so, the Minister of State will confirm that a 2·1 per cent. increase, which has been much flaunted on Conservative platforms during the past month, will result in a deterioration in the service provided by the NHS. Will he confirm that even that figure can be maintained only by a massive increase in prescription charges, far beyond the level of inflation, which has been hinted at and leaked but which, as far as I know, no Minister has yet emboldened himself to announce?
What savings do the Government expect from the abolition of the Inner London education authority, the Greater London Council and the metropolitan county councils? Nowhere in this forecast does a figure for that saving appear, yet we were told that that was the purpose of their abolition. Will the Minister of State confirm the figures that I suggested a moment ago for the job loss that the White Paper entails? It would be extraordinary if the Government hypothesised every other outcome and predicted every other result but had not the slightest view and had not made the slightest estimate of how many jobs the proposed cuts were likely to lose.
The White Paper already makes one assertion look even shabbier that it did on the day that it was made—that the Chancellor looks forward to a fortnight tomorrow as an opportunity to present a Budget for jobs. In almost every aspect, the White Paper prepares for another year in which unemployment will increase. It prepares for that by cutting capital investment, by cutting Civil Service manpower, by reducing expenditure from local authorities and by setting the scene for the Chancellor to fulfil other obligations and to pursue other priorities which are more important to him. It prepares for the Chancellor once more, as is always the case, to choose the high unemployment option.
Mr. Peter Rees: The right hon. Gentleman has been free with his challenges, as he is entitled to be. I issued him one in the debate on the autumn statement and at the beginning of my speech today. It is simple but fundamental. What level of public expenditure would the right hon. Gentleman advocate if he were in power now and for the next three years, and to which areas would he direct it?
Mr. Hattersley: The right hon. and learned Gentleman always asks the questions. I shall give him two immediate answers. The Chancellor's decision, which is likely to be taken a fortnight tomorrow, to reduce the PSBR from this year's level is misguided and misconceived, as the money could be much better spent invested in job-creating projects. The £1·5 billion that the Chancellor still hopes to devote to tax cuts would be much better spent invested
694
in jobs and in reducing unemployment. That area of expenditure is possible. I know, every time that I answer this question, the pathetic obsession of the Government with talking about any policy other than their own. In my 20 years in the House, I have never known a Chancellor who was so ashamed of discussing what he was doing and the consequences of his policy.
Mr. Budgen rose—
Mr. Hattersley: That does not surprise me, because I have never known a Chancellor who was so unpopular. He is unpopular crucially because of the spirit and intention revealed in the White Paper — total disregard of the unemployed. Because of that disregard, we propose to vote for the amendment.
5.59 pm
Mr. Michael Portillo: I am grateful to you, Mr. Speaker, for allowing me to catch your eye so that I can make my maiden speech.
I begin by paying tribute to my predecessor as the Member for Enfield, Southgate, Sir Anthony Berry. Sir Anthony was a popular member and his death in the bombing at Brighton last October was tragic. I had the privilege of hearing you, Mr. Speaker, outside the House deliver an address in which you recalled Sir Anthony's life and his many fine qualities. I shall not attempt to repeat the well chosen words that you used on that occasion, but, from my constituency experience, I shall add a few words.
It is clear that Sir Anthony was absolutely dedicated to the welfare of his constituents. He showed that dedication by his custom of visiting people in their homes to discuss their problems. That courtesy and kindness was typical of Sir Anthony. It is a stunning paradox that such a kind, courteous and gentle man should lose his life at the hands of men of violence. I know that the whole House joins me in remembering Sir Anthony, deploring his death and grieving for him. I am sure that all hon. Members also join me in paying tribute to Lady Berry, who has borne her bereavement with dignity and courage. [HON. MEMBERS: "Hear, hear."]
Sir Anthony Berry made his maiden speech almost exactly 20 years ago in January 1965. He referred to the part of the North Circular road that runs through the constituency of Enfield, Southgate. He looked forward to that piece of road being widened shortly. Twenty years later we are still expecting the road to be widened. We often hear the Government say that not all public expenditure is necessarily desirable. Many of my constituents agree, because they are living in properties that are decaying, not because anything is wrong with them but because of planning blight. A number of my constituents would like the Government to save the money that they have in mind for the project and to allow them to continue to live in their homes rather than cause those homes to be destroyed.
At the other end of the constituency, far from the din of the north circular road, my constituency reaches the countryside. One can drive along the Hadley road and see nothing but green fields on either side. I imagine that I am one of the few London Members who has the privilege of having a number of farmers among his constituents.
In the middle of my constituency is Winchmore Hill. One of my history books says that about the year 1600 the people of Winchmore Hill were very primitive and much

695
given to witchcraft. Recently, my right hon. Friend the Chancellor of the Exchequer referred to the belief that public expenditure could cure all our ills as
"an ancient form of witchcraft."
I assure my right hon. Friend that nowadays the good people of Winchmore Hill are no more attracted to that practice than their near neighbours in Palmers Green or Cockfosters.
Frequently, when discussion in the House turns to public expenditure, a number of hon. Members wonder whether they can improve on the traditional procedures by which they consider the revenue that the Government raise at one time of the year, in the Budget, and how that money is spent at another time of the year, in the autumn round of discussions. The Armstrong committee considered that matter in 1980 and came forward with a series of proposals for bringing the consideration of taxation and spending together. The proposal was considered by the Treasury and Civil Service Select Committee and the Select Committee on Procedure (Finance). The Government went some way towards meeting the point by devising the autumn statement in the form in which we now know it.
In its present form, the autumn statement has given rise to a number of unforeseen difficulties. Public and press attention naturally focus on that part of the autumn statement in which the Government say how they view the prospective fiscal adjustment in the following Budget—whether they consider that taxation is likely to be increased or decreased. During the past two years we have seen that, whatever the Government say, the results can be unfortunate. In November 1983 the Government announced that the prospect was for a moderate increase in taxation in the following Budget. The Government were denounced for being too gloomy. People asked whether the Government were still committed to their policy of cutting taxation. In the event, all that gloom was unnecessary, because the Government were able to decrease taxes in the Budget.
Last November, the Government said that the prospect was for a decrease in taxation in the Budget, but that statement brought denunciation on the Government. At first people said, "The Government have underestimated how much money there is to give away in the Budget." People thought that the Government were being too cautious. Subsequently, the Government were denounced for having thrown caution to the wind. It appeared that the Government were more determined to cut taxation than to continue their fight against inflation.
No one can reliably estimate in the autumn the leeway that the Government will have in the spring. Whatever figure is announced, it either increases or depresses expectations. More importantly, it creates confusion about the Government's policy. Sometimes that can have serious consequences.
Our present arrangements are an uneasy halfway house between our traditional procedures and the radical proposals in the Armstrong report. This middle position does not satisfy those hon. Members who want a thoroughgoing reform. On the other hand, it sets a number of hares running about in a way that is not helpful to the Government or to the House. I cannot help thinking that the present position is likely to prove unstable and that we shall want to move either forward towards the Armstrong
696
proposals or backward to the position in the old days when the Chancellor said very little in advance of his Budget statement.
May I use the opportunity of my maiden speech, Mr. Speaker, to make a point that concerns the relationship between public expenditure and unemployment? I am reminded of what happened to me last year at the Conservative party conference in Brighton. At about 2 am on what proved to be that terrible morning of 12 October, I was standing in the bar of the Grand hotel. Because the hour was late I got into a heated discussion with a journalist. He said, "The Government's policies are designed to create unemployment." Of course, I disagreed with that. The discussion became heated. To emphasise his point, the journalist beat the pillar beside us with his fist and said, "This is a pillar; that is a fact. Your policies are to create unemployment; that is a fact, too." The discussion became even more acrimonious and the journalist rather abusive, so I left the Grand hotel and went safely to bed in my hotel down the road.
In the morning I reflected on two things. First, I was grateful to that journalist for having been abusive towards me; otherwise I might have stayed in the Grand hotel and been there at the time the bomb went off. Secondly, I reflected on the fact that the pillar which he had thumped with his hand and which represented for him absolute certainty was probably a pile of rubble. I thought that, in the light of day, the journalist, too, was a little less certain about the motives of Government policy.
Although I understand that the Opposition believe with absolute conviction that the way to reduce unemployment is to increase public spending, I ask them to understand the absolute sincerity with which Conservative Members say that to increase public spending is to increase taxation which would lead to fewer jobs and higher unemployment.
6.8 pm
Mr. Richard Wainwright (Come Valley): It is a great pleasure to congratulate warmly the hon. Member for Enfield, Southgate (Mr Portillo) on an admirable maiden speech. I am sure that hon. Members on both sides of the House who had the pleasure of listening to him agree that he was eloquent, confident and witty. As one who took a humble part in the election which brought the hon. Gentleman to the House, I thought that he was as agile in marshalling his presentation this afternoon as he was during the campaign in dealing with the garden gates and garden paths of Southgate. I do not want the hon. Gentleman to be alarmed. I have no intention of carrying that congratulation to the lengths that were applied earlier to his colleague and hon. Friend the Member for Enfield, North (Mr. Eggar), was who was described as winsome. That is a compliment that I shall spare the hon. Member for Southgate.
I understand that one consequence of the hon. Gentleman's election to the House is that the Conservative party has lost his expert assistance in its back rooms. But it has gained an expert Back Bencher, who may not remain a Back Bencher for long if his party returns to power during his tenure of the Enfield, Southgate seat. I am sure that we all look forward to hearing a great deal more from him and also to discovering in his later speeches whether he is in favour of advance to a green Budget, or whether he wants to go back to the bad old days which were so warmly greeted by the Conservative party antiquarians when he mentioned them in his speech.

697
This annual debate, its form and terms have been greatly misrepresented outside the House, because in recent months the fact that we have a debate on the whole of public expenditure, including estimates, which usually turn out to he wildly wrong, of local government expenditure plans, has been represented to the country as an annual and firm precedent for Parliament grossly to interfere in local government finance by settling the local rates and how they should be spent.
I should like to take the opportunity to repeat the obvious point that we in the House do nothing of the sort. By tradition, we are only asked, and can only be asked, to take note of the public expenditure White Paper. There is nothing in the argument that Ministers have been adducing outside the House that this annual debate is a precedent for the House of Commons to interfere in the way that local government raises, and the extent to which it spends, its money.
I hope that Members will recall the fact that the last Labour Administration were defeated at the end of a public expenditure White Paper debate and carried on the next morning as Her Majesty's Government without any hitch, as, of course, they were naturally entitled to do. It is a debate for observing public expenditure plans, and not for sanctifying, let alone voting, the cash for them.
The first point that I wish to make about these plans is that whether we take them cooked by the Treasury for presentation to the House, or reduced to their raw but refined state by the Select Committee — whichever choice we care to make, I am sure that the Select Committee's adjustments are necessary for a fair presentation—public expenditure, on average, has been rising substantially year by year since 1980. It has been rising by 2 per cent., if we take the Treasury's unadjusted figures, and by some 3 per cent. if we make the necessary adjustments which the Select Committee makes year by year without apparently getting the Treasury to amend its ways. That of course, does not represent expenditure that produces marvellous tangible improvements in the country's equipment or the well-being of our people; it actually represents the appalling year-on-year cost of the medium-term financial strategy and the Government's approach to public finance and the running of the economy.
The British people are patient, and, fortunately for the Government, they have many other things which they regard as more important than politics or even their tax demands. For some years they tolerated that rise in cost. For some of them it might have been on the ground that this was an experiment which was worth making and which they must give a fair trial. Public opinion polls and other signs and portents show that even the long-suffering British public are now beginning to realise the appalling cost of the experiment and to say that it is time it was called off.
The fact that year by year we have all these public expenditure plans, usually underestimating the cost of the misery which the medium-term financial strategy is causing, but, nevertheless, costing it out in an appallingly graphic way, surely shows that the process should be severely modified, if not entirely reversed.
As is well known, the Government's policies have serious effects on the cost of cash benefits for the unemployed and the associated social problems, and on the personal social services, which are now under heavy strain as a result of the prolonged unemployment,
698
especially among older people, who have given up hope of ever obtaining a job again, and young people who do not know what it is to go to work after leaving school.
There is also a substantial increase in the cost of law and order. We must count ourselves lucky and grateful for the fact that there has not been more disorder to contain — it must always be contained — as a result of the hardship that the Government have inflicted. But the cost of precautions is very high.
It is important to note that this steady rise in public expenditure does not just completely contradict the hopes of Conservative Members for their original policies; it also shows that the policies cannot be implemented without continuous and increasing social costs, and that the position will become worse. I challenge the Minister when he replies to give any sign that there will be an improving trend in social cost, reflected in the financial cost, of the policies which the Government stubbornly insist on implementing.
Nowhere is that more clear than in the reductions which the burden of providing for the unemployed and all their problems are causing in the nation's proper capital expenditure for maintaining, improving and modernising, its public assets. The Government are being deliberately perverse. The Chief Secretary gave that impression, to me at any rate, when he was good enough to appear before the Treasury and Civil Service Select Committee. On two counts, which I single out, he refused to acknowledge the reasonableness of the questions that we were putting to him. First—this is important if the Government are to retain control of public expenditure — he refused to admit frankly that when he meets Ministers in charge of spending Departments in the well-known round of the Chief Secretary dealing with departmental bids during the late summer, he is completely deprived of any efficient or acknowledged yardstick to measure their claims — they are simply asking for money to maintain the assets and physical properties for which their Departments are responsible.
In evidence the Chief Secretary eventually agreed—this is all carefully recorded in questions 262 to 268 in the evidence taken by the Treasury and Civil Service Select Committee on 18 February—that that in trying to counter and to reduce the spending bids of his opposite numbers in Government he, on behalf of the Treasury, had to rely
"on one's colleagues, obviously, to a degree, to judge these as they are put up to them on a case-by-case basis."
The fact that the Government have no adequate record of public property, let alone the condition which it is in, renders the Chief Secretary virtually naked when he goes to the conference chamber to try to counter and control the spending bids of Ministers in charge of the great spending Departments.
Mr. Roger Freeman: Unlike the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who refused, both in the debate on the autumn statement and today, to say what level of public spending his party proposes for next year, and given the fact that the leader of the Liberal party, the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) has now joined the debate, will the hon. Gentleman tell us what precise level of public spending his party would like next year?
Mr. Wainwright: In response to such an intelligent question, I should like to oblige the hon. Gentleman

699
straight away. However, I must point out—and the hon. Gentleman, as an accountant, will be the first to understand—that, just as the Chief Secretary is crippled, in his arguments with spending Ministers, by the fact that we have no record of public assets, their value and the extent to which they have depreciated, so every other party in the House is equally crippled. I make a plea for a proper record and data base of public assets as much in the interests of future Governments as in the interests of the Government of the day.
I mentioned a figure which we made public last week of an initial boost to public capital spending of £1 billion in the next financial year, which is one of the alliance's priorities for the Budget. We believe that that is the minimum that should be made available. However, I cannot prove that that is the figure required to maintain public assets at their present value. I suspect that it is an understatement to say that our figure for boosting public capital expenditure in the next financial year, £1 billion, is adequate. We would hope to maintain that if we were in power, year by year, for at least the next three years. There is no secret about that. It was made public last Friday.
When the Chief Secretary finally admitted that he was not armed with the necessary figures to deal with spending bids for more capital works by his opposite numbers in the Cabinet, he was asked whether the Government ought to start remedying that state of affairs by establishing a data base, a record of public assets and their condition, so that the House may know what is necessary year by year to provide for their depreciation. In tones of some surprise, the Chief Secretary said:
"If you are asking me whether the Treasury is a possessor of some kind of doomsday survey of all the capital assets of the whole public sector, the answer is no."
The right hon. and learned Gentleman went on to explain to us, as if we did not know, that the public sector owns rather a lot of property. However, the "doomsday survey", as the Chief Secretary chose to call it, is nothing more than a register of plant and buildings and other assets which every limited company is required by law and accounting convention to possess and keep up to date. It seems extraordinary that the Chief Secretary should imply that what was done in the 11th century, with no equipment more sophisticated than a quill pen, should be beyond the resources of Governments in the present century, armed with all our devices and techniques of taking blocks of capital expenditure according to the year in which they are made rather than counting all the spoons in all the public canteens in the country. Nobody indulges in that sort of detail any longer, or needs to.
Without those figures, the House is put in a most unsuitable and unbusinesslike position. When we have debates like this, we do not know whether we are being presented with figures which keep the public assets in a reasonable state, or whether the Government are milking the condition of public property to try to reduce taxation.
I should like now to refer to the relief of the most urgent and pressing poverty, most of it in families, which is commonplace today and, I am sure, well known to all hon. Members through their surgeries, mailbags and in other ways. The alliance wishes to increase the provision for current public spending in the next financial year and years to come in order at the very least to bring relief to the
700
hardest cases. We cannot responsibly suggest any way of banishing poverty or anything like that in the present situation. To get anywhere near that would require a much more buoyant economy and a working contribution from some 3·5 million people who are not allowed to work at present.
However, in our present economic straits, what would be possible is a great expansion of the family income supplement—not as a long-term remedy, but as a short-term and emergency remedy. There would also have to be a proper uprating of the supplementary benefit allowance to those who have been unemployed for more than 12 months. We regard it as a scandal that their benefits should be some 20 per cent. less than the general rate of long-term supplementary benefit. All that improvement could be done in the first year by expenditure of approximately £1·3 billion, and we believe that it is an urgent priority.
Under the ludicrous way in which the House debates public expenditure at a different time from debating revenue, it is possible to misrepresent that as simply a reckless bid for more public spending without saying where it is to come from. However, the fact is that the Government have their own views. It so happens that their views would not affect the expenditure side of the account but, instead, the revenue side. The rumour is that the Chancellor wishes to come to the rescue of all income tax payers in the country by raising the thresholds.
That is a debate for the revenue side of the account on a different occasion. I pause simply to point out how extremely difficult it is to handle these matters in the House when the same problems can be addressed through either the revenue or expenditure side of the account. However, I must add that, in the view of the alliance, a measure directed straight to those who are in the greatest poverty is greatly preferable to a raising of the thresholds, which benefits large numbers of people who, no doubt, are glad to have a tax saving, but are not in urgent need of the money. That is perhaps the biggest divide in terms of public finance, apart from the capital side of the account, between the Government and the alliance.
Mr. Campbell-Savours: Over the weekend several of us will have seen reports of the £4 billion reflation which, I am informed, is the policy of the alliance. Is that common policy to all sides of the alliance? Is it accompanied by any measure of exchange controls?
Mr. Wainwright: I am grateful to hear that reference to "all sides of the alliance". The more sides we can gather into the alliance, the better we are pleased. I think that it was clear to any reader of the reputable newspapers on Saturday morning that those were alliance Budget priorities, not an alternative Budget. People who cannot inspect the books must not try to present an alternative Budget. Those were the alliance's Budget priorities introduced by my right hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) to the press last Friday and then elaborated upon by the leader of the Social Democratic party, my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen). Yes, it is an alliance document which advocates — I must be careful not to annoy the Chair— a selective reflation which amounts to £4 billion in the first year.
Mr. Campbell-Savours: What about exchange controls?
Mr. Wainwright: I shall not discuss exchange controls in the middle of a public expenditure debate. I am happy to talk to the hon. Gentleman about that another time. I confirm that it fell to me—I have never repented of it—to welcome the former Chancellor of the Exchequer's decision to lift exchange controls when he made the announcement in the House. It was a wise, civilised and internationalist step to take.
The essential matter in this debate is to persuade the Government, not to reduce public expenditure or to repent of their covert increases in public spending, which have been about 3 per cent. a year since 1980, but to redirect their increased public expenditure so that, instead of dropping into the bottomless well of unemployment, it is used to build up our human and physical resources.
6.30 pm
Mr. Terence Higgins: It is my great pleasure to begin by congratulating my hon. Friend the Member for Enfield, Southgate (Mr. Portillo) on an outstanding maiden speech, which we greatly enjoyed. He paid a fitting tribute to his predecessor, Sir Anthony Berry, who died in tragic circumstances. He was a good friend to many hon. Members, and certainly the words of my hon. Friend, when he paid tribute to Sir Anthony Berry's work in the constituency and in the House, were entirely appropriate. I have had the benefit of my hon. Friend's expertise and advice in one of his former incarnations, and therefore I know that he will make a good contribution to our economic debates. One of his predecessors in Enfield before the constituency was divided, the late Iain Macleod, played a major part in our economic debates. Therefore, he has predecessors of whom the House is proud. My hon. Friend will have a difficult task in succeeding them. We look forward to hearing what he has to say, not least about procedural reform. Some of the matters to which he referred have been covered by the report of the Select Committee on Procedure during the last Parliament, and I hope that we can make progress on them.
I shall proceed immediately to those issues. Public expenditure White Paper debates have never been satisfactory or popular. The reason is not difficult to discover. In a sense they are a post mortem on decisions that have already been taken. As my hon. Friend pointed out, much of the matter has already been discussed during the debate on the autumn statement. At the same time, such debates anticipate what is likely to be said in a few days' time in the Budget. As these debates are sandwiched between a post mortem and the Budget, it is not surprising that they have been never been successful.
It would be appropriate to have this debate not ahead of the Budget, but perhaps in June or July when we can appraise the previous White Paper in the light of the Select Committee's reports and consider the priorities for the forthcoming White Paper, which begins to be formulated in June or July. I am sorry that that has not had support from the official Opposition. The suggestion is certainly worth considering.
The hon. Member for Colne Valley (Mr. Wainwright) pointed out that on a previous occasion the Labour Government were defeated on a similar debate. The net effect of that defeat was nil, and proceedings continued exactly as previously. Therefore, it is not entirely surprising that the debate is not regarded as one in which
702
the vote is important. However, the debate certainly is important. At one time it used to be a two-day debate, but that has lapsed, and perhaps it is just as well.
I hope that our debate will be enhanced by the report of the Treasury and Civil Service Select Committee. It was a considerable feat that the Clerks and advisers were able to produce the report in printed form two or three days after the report was agreed. Therefore, it is right to congratulate those responsible for that and to express our thanks to the Treasury officials who gave evidence and to my right hon. and learned Friend the Chief Secretary, who appeared before the Committee at short notice to answer questions on highly complex issues.
We have included in the report the Government's reply to our report on the autumn statement, which appears on page 42. The response was neither helpful nor adequate. The Select Committee seeks to raise the standard of public debate and to improve the mechanism for managing our economic affairs. In our report on the autumn statement, we pointed out that the question of priorities was not being dealt with satisfactorily. We said:
"The evidence we have received does not convince us that there are adequate machinery and procedures to enable Cabinet to take an overall view of the relative merits of departmental programmes … Recent events suggest that in some cases individual departments have been allocated a lump sum by the Treasury and then left to determine their own priorities within the limits set …
Against this background we recommend a re-appraisal of the machinery for determining public expenditure priorities … with particular reference to the need to improve the allocation across departments."
The Treasury's response to that recommendation is not as forthcoming as it might be. The allocation of priorities of public expenditure is one of the major tasks that face a Government and one of the major issues in which the House has a fundamental interest because it affects many different aspects of our public life. I hope, therefore, that further consideration will be given to that recommendation.
Does the White Paper give a reasonable appraisal of the public expenditure position? In our report we pay tribute to the improvement in the format and to the considerable trouble to which the Treasury has gone to make the presentation more understandable. We would not want anything that we say in the report to detract from that compliment. At the same time, some of the presentation is misleading. Chart 1.1 is a block diagram which shows that the block has scarcely changed in size for three years. That gives the impression that all is well in the best of all possible worlds, that the Government have everything under control and that their targets are being achieved. It seems to the Committee, which produced a unanimous report, that adjustments need to be made to those figures to give a much truer picture. I shall deal with three adjustments.
First, there is a strong case for considering the matter in cost rather than in cash terms. We should allow for the fact that as the rate of inflation has fallen more than anticipated — all hon. Members welcome that — the amount of cash going on public expenditure should be adjusted accordingly. We should see it somewhat below the cash limits.
My next point does not appear in our report. When cash limits were first imposed, they were a good idea because inflation was rising rapidly. Understandably, they curtailed the rate of increase in public expenditure. However, they are not an effective restraint when the rate

703
of inflation is falling faster than anticipated, because in those circumstances one would reasonably expect Departments to spend below their cash limits. However, the danger is that they will spend up to their cash limits. That point should be considered if we want to bring public expenditure under control, given all the other pressures.
When cash limits were first introduced, the Treasury was understandably reluctant to change back to or even to take account of cost terms. That has long since passed. Therefore, we could now reasonably concentrate more on cost terms without undermining the Treasury's basic approach to cash limits.
The second adjustment relates to debt interest. Here I find the Treasury's approach very strange. If one looks at the figures for 1985–86, 1986–87 and 1987–88 — they appear on page viii of our report — one sees that debt interest goes up substantially from £9 billion to £9·5 billion to £10 billion. That figure is not included in the planning total. Consequently, public expenditure looks much better than would otherwise be the case. We are told that that is so because it is something which is subject to limited control, but that is true of much of the demand-determined expenditure which appears in the White Paper and which is part of the planning total. That is not a sensible reason for not including debt interest in the White Paper analysis.
We are told that interest is taken into account when considering the PSBR, fiscal adjustment, and so on, but it is difficult to see how that is done. We are constantly told by the Chancellor that the Government's policy is that revenue shall determine expenditure, not the other way about. If so, and if interest charges suddenly go up, one might expect some countervailing reduction elsewhere in the public expenditure programme. That is not the case. Therefore, the White Paper's method of accounting for interest is not satisfactory. It gives a misleading impression.
My right hon. and learned Friend the Chief Secretary said that all this was more a matter of presentation than of substance. That may be so. I agree that to some extent it is the presentation about which I am complaining, but if the presentation is not sufficiently transparent, matters of substance may go uncommented on, and the Treasury may delude itself into believing that it is doing better than it is.
There has been a long-running battle between the Treasury and the Treasury and Civil Service Select Committee on how asset sales should be treated. The Chancellor has consistently maintained that the proceeds of asset sales should be treated as if they were negative expenditure. That is convenient in the context of the presentation of the White Paper figures. For example, if one has a large chunk of sales of British Telecom, the public expenditure figure appears to be reduced by that amount, as does the PSBR. In our view, that is not a very good way of treating this. It would be more realistic if it were treated as a means of funding the PSBR rather than reducing the PSBR and public expenditure.
This is particularly relevant to council house sales. The sale of council houses is an asset sale which in the past has been treated by the Chancellor as a reduction in public expenditure and the PSBR. Understandably, councils now wish to spend the money which they have received from council house sales. As the Select Committee points out,
704
that could be foreseen. It was apparent that if councils sold houses and got the proceeds, they would want to spend the money.
The Select Committee, in paragraph 40, points out:
"We find it strange that the Government did not foresee the problems inherent in this accounting treatment for these transactions, or its scale. We are left with the impression that the rationale for the existing arrangements has had everything to do with the Government's desire to reduce the apparent size of the PSBR, and too little to do with the rational use of local authority assets."
The Select Committee's previous report was, I think, wrong when it said that this should be treated as a means of funding the PSBR rather than as a reduction in public expenditure. The Select Committee should have included the word "temporary", as it does in its present report. This was a temporary means of funding the PSBR. But having included a presentation which makes the figures look more favourable in previous years, the Chancellor is now confronted with the fact that, from a presentational point of view, the figures begin to look more difficult in the future.
More particularly, there is an underlying reality to these concepts. Therefore, the argument that councils should be allowed to spend the previously prescribed proportion—40 per cent. rather than 20 per cent. — against a background of considerable excess capacity in this industry, seems to be quite strong.
I wish to comment briefly on negative external financing limits and the nationalised industries, especially in relation to water authorities. It is slightly worrying that I seem to be in agreement with the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). We must carefully consider the justification for saying that the water industry should pay off its debt and from then on should finance future investment entirely from current receipts. Most industries tend to finance a long-term project by borrowing, not by finance entirely from current receipts. We questioned the Chief Secretary about this, and he was kind enough to send a subsequent note which appears on the last page of the Select Committee's report. He gave GEC as an example. In reality, if investment is financed in this way, consumers are effectively financing the investment which, in the case of water authorities, will continue for perhaps the next 50 years to the benefit of future generations and those yet unborn. It must be arguable whether that is a good way of managing our affairs.
Sir Kenneth Lewis: I have just had a meeting with the Anglian water authority, which will have to increase its rates this year by 12·5 per cent., for the reason given by my right hon. Friend. The authority tells us that it will also have to increase its rates by the same amount next year and, perhaps, the year after, when paying from revenue rather than by borrowing will apply. If water authorities increase their prices by more than twice the rate of inflation for the next three years, that is surely serious.
Mr. Higgins: I have considerable sympathy with my hon. Friend's view. We must appraise the underlying concept on which this proposal is now based.
Against this background, the Chancellor is clearly faced with an extremely difficult set of choices when he considers the Budget. He will have to decide whether to alleviate the burden of taxation — perhaps to allow an increase in public expenditure in the area that we have just been discussing — or to reduce borrowing. He is in an

705
immensely difficult situation, because in some respects the so-called fiscal adjustment will now be higher than some months ago due to changes in the exchage rate. On the other hand, the extent to which the economy is vulnerable to exchange rates, if we are to have a give-away Budget, is likely to be considerable. He must therefore make an extremely difficult judgment. It is a question of hitting the right balance between the three items that I have just mentioned.
We have recently been concerned about the effect which the rise in the dollar — rocketing upwards — has had on interest rates. That is of grave concern to mortgage payers and borrowers. I am more worried about the effect that a sudden collapse of the dollar may have on our economy and on the problems that the Chancellor will face in the Budget. I very much hope that at international level we can procure reasonable contingency plans to deal with that, because a comparatively slow rise in the dollar could present far greater problems than those we are now facing.
6.50 pm
Mr. Austin Mitchell (Great Grimbsby): I do not intend to follow the line of the right hon. Member for Worthing (Mr. Higgins) who gave a clear and straightforward exposition of the recommendations of the Select Committee on the Treasury and Civil Service, which he chairs, and of which I am a member. I hope that his right hon. Friends on the Government Front Bench have noted that this is very much an agreed report by the Select Committee and that it is very critical of the Government's expenditure plans. The "Worthing handbag" of recommendations was endorsed by the entire Committee.
The problem with the public expenditure White Paper is that essentially it is an excercise in pulling wool over the eyes of the Government's own less intellectual supporters. Wooly-headed monetarists are having the wool pulled over their eyes. The White Paper claims that the Government are doing what they are not doing — namely, controlling public expenditure. The White Paper attempts to say that in their terms the Government have been successful. First, those terms are fallacious and directly harmful to the real economy, and, secondly, the Government have failed even according to their own terms. This public expenditure White Paper cannot conceal their failure. Indeed, from the way in which it is set out, the White Paper is an example of the debasement of the Government's own statistics. Our report was, in "Committeespeak", extremely damning. I refer only to a few of the recommendations:
"misleading impression, … consistent failure, — reserve allowance of £3 billion is likely to prove inadequate."
That is "Committeespeak."
The report does not say that the Government are not telling the truth, but, in "Committeespeak", the report comes as near to saying that as it can. The members of the Committee came from both sides of the House. The report is a damning indictment of the Government's public expenditure plans. They are no more than an exercise in creative diminuendo. They minimise the expenditure for the years ahead. It is an exercise in slimming by prayer. In all their previous efforts, the Government have been right in only one of their five sets of predictions. The overall pattern has been that public expenditure has risen as a proportion of national income from 39 to 42 per cent. That may be more an example of their contribution
706
towards the reduction of the national income than it is of their success in controlling public expenditure. However, even in their terms the indictment is damning.
The position is shown to be even worse in the White Paper. The Government are pretending that, with an election approaching, with Back Benchers becoming increasingly nervous, jittery and anxious about their seats, with the Confederation of British Industry venturing to get off its knees from the grovelling, supplicant position that it has adopted thus far towards the Government and with the infrastructure deteriorating as it is, they will be able to cut public expenditure. They will be unable to do so. The Government pretend that there will be dramatic reductions overall. Taking into account the cost of the miners' strike, the figures for which are to be published in the next two or three weeks, the Government are pretending that they will be able to hold public expenditure when experience shows that it will increase in the three years covered by the White Paper by 8 or 9 per cent. We know it, the Government know it, and the world knows it.
Why are the Government going through this elaborate farce of pretending that they will be able to hold public expenditure? It is rather like the exercises performed by a failed slimmer—a slimmer who is still flabby. That is not a picture of the Chancellor of the Exchequer, but if the stomach fits he can wear it. This failed slimmer, still flabby, stands in front of the mirror and desperately holds in his stomach and says, "I have not done very well so far, but, oh boy, how I will lose weight over the next three years." Nevertheless, the circumstances which would help to bring about the weight loss — I am holding in my stomach as I say those words, Mr. Deputy Speaker — will be far more difficult politically than those faced by the Chancellor during the previous period.
The Government have carried out an exercise of fabrication and false prediction of distorting the basis of their policy. They have assumed in the White Paper that pay rises in the public sector will be held at 3 per cent. In no previous period have increases been held at 3 per cent., and all the signs are that they will not be held at 3 per cent. during this period. Yet the Government are still attached to this theoretical, unrealistic figure and to an unreal inflation figure.
The Government assume that inflation will come down, although we all know that, particularly because of the impact of interest rates by which the country is being crucified today, in a way which has never happened before, inflation will increase. Real interest rates are higher now than they have ever been since 1922. Yet the Government pretend that, despite that inflationary impact and the fall in the pound against the dollar, which is resulting in yet another inflationary impact, they will continue to bring down inflation. That inbuilt basic assumption will not be fulfilled.
The Government's standard assumption is that unemployment will not increase. I am assuming that a growth of 2 per cent. is built into the public expenditure White Paper, because that is the assumption made in the medium term financial strategy of 1984. However, even with an estimated growth of 2 per cent., there is still scope for an increase in unemployment of between 200,000 and 300,000 at a cost of about £500 million in terms of the increase in unemployment pay. Therefore, assuming that a growth of less than 2 per cent. will take place as the recovery falters, I believe that the increase in

707
unemployment will be even more expensive. Even on the Government's assumption that the number of unemployed will remain constant, expenditure on the unemployed will increase by 9 per cent. Yet, even if we assume that the unemployment figure remains constant and that unemployment benefit will be increased in line with inflation, unemployment payments must increase by 14 per cent. Where, therefore, has this mysterious assumption of 9 per cent. come from? The Government have fiddled the inevitable basics of their prediction. The Government have fiddled even more the actual expenditures that they control. A system of creative accounting has been turned into a system of government by the Treasury Front Bench.
Local government expenditure is crucial. My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) referred to the assumed savings from the abolition of the Greater London council and the metropolitan counties. That saving, in paragraph 16, is estimated to be £100 million. It is not a scientifically worked out saving. The Government have told the civil servants to assume that this saving will result from the abolition of those authorities. We know that that figure will not materialise. There was an article last week in the Financial Times which pointed out that savings are unlikely to be made upon any prediction, yet there is an inbuilt assumption that £100 million will be saved. The real spending by local authorities on goods and services has increased during the last five years by 2·5 per cent. That has taken place despite all the cuts in rate support grant and all the attempts to restrain spending by local government. However, the Government assume that during the next three years local government spending will be reduced by 7 per cent. That is a totally unreal estimate, even given that torturer's gallery of weapons that the Government have mobilised against local government in their desperate attempt to control it. We all know that that is a fallacious assumption.
Mr. John Maples: The hon. Gentleman says that local authority spending has increased by only 2·5 per cent., but that has been the result of adding in a substantial increase in capital spending. I am sure that the hon. Gentleman will agree that current spending has risen by 10 per cent. in real terms over that period and that is the figure that the Government expect to be able to control.
Mr. Mitchell: My point is that current and capital spending increased by 2·5 per cent. That is the important figure. Many hon. Members would prefer capital spending to be increased further because it is essential that it should be increased in so many areas. However, my point is that, even after mobilising all the weapons that the Government have mobilised until now, they have been able to screw down local government spending only by that figure. Their assumption that they will be able to screw it down by 7 per cent. over the next three years is totally fallacious. It is the usual trick of the Government saying, " We are unable to control our own spending, so let us pass the buck to somebody else. The buck stops at local government." If that is to be the Government's policy it will lead to chaos and extreme difficulties for local government. It will cut across several bases which underlie Govenment policy.
The Government want to transfer treatment in hospitals to treatment in the community, yet spending upon the
708
personal social services is to come down by 2 to 3 per cent. at the same time as that transfer is brought about. The Government tell us that they want to improve the inner cities, yet urban spending is down 11 per cent. in the period covered by the public expenditure White Paper.
The fiddling becomes even worse with the nationalised industries. That has been adequately dealt with already. Gas and electricity are being used and will continue to be used as milch cows — a form of disguised taxation, putting the burden of heavy charges on those least able to bear them, and raising money indirectly for the Government at the expense of our competitiveness in the world market. That procedure is now being transferred to the water authorities, which will cause major problems for all the water authorities and a major outcry about water rates which is already building up.
Overall, the dramatic reduction in the external financing limits of nationalised industries which the Government posit is impossible on any prediction. It will mean either massive increases in prices or an enormous acceleration of growth in the economy, which we know will not occur.
The fiddling of the figures is also true for social security. If one deducts spending on the unemployed, that has risen by 13·5 per cent. in the past three years. Yet it is predicted that it will increase only 4·5 per cent. in times of even worse social difficulties in the three years ahead. That is impossible to achieve. One cannot see on what basis that prediction is made.
There is even inadequate allowance for the EEC budget contributions that we know we shall all have to make. It would be nice to see the Government dedicating themselves with the same determination to the control of agriculture expenditure, which increases pari passu with production, as they have shown to the miners. Can it be that the miners must be broken and their subsidies cut because they are a Labour-voting section of the community, when the even more massive subsidies which go to the farming community under the common agricultural policy and in a national support system as well, which have made 10,000 millionaires of the biggest landowners in Britain in the past few years, will not be tackled in the same way by the Government, who are dedicated to cutting spending, simply because those sections of the community vote for the Government?
The predictions in the White Paper are unattainable. I am an incurable romantic, rather like the man who has AIDS and herpes at the same time, but I can see no way in which the predictions will be fulfilled on the figures. The cuts which will be necessary will hit jobs in the Civil Service, local government and housing, when we need a huge increase. The Building Employers Confederation estimates a loss on those figures of 600,000 jobs in the building industry. Employment in all those areas will be hit and costs will be increased, just when the economy needs a boost from public spending.
This is an exercise in slimming by prayer. It has been implemented in an attempt to pull the wool over the eyes of the Government's Back Benchers in the House of Commons, particularly over those of the Government's monetarist supporters. Therefore, it is nothing more than a ritual casting of artificial pearls before very real swine. It is typical of a Government who have grown accustomed to the manipulation of facts, to half-truths, to fiddling of

709
the statistics and to distortion of the trends. The Government are dedicated to thinking small and then pretending that they have achieved their target.
I realise that that method of thinking is forced from the top by someone who believes that the truth is in her own head, not in the world outside, which is the beginning of the bunker mentality. That bunker mentality is embodied in these public expenditure plans.
The tragedy is that the Civil Service is now being forced into becoming a machine for justifying on the figures predictions which are not its own, which are forced on it by Ministers, and which have no basis in fact. That is no basis for adequate decision-making on a sensible assessment of priorities. It is more a matter of abnormal psychology than economics, but I must point out that that is the basis of the strategy.
The real question, which Labour Members in particular must ask is why the whole farcical exercise is necessary. Why, when the country is getting meaner, shoddier, nastier and more divided, when our public capital and infrastructure are crumbling as they are, do we have to go for this kind of fallacious exercise to justify Government policies to people who are wrong in the first place?
The whole basis of the strategy is to get public sector borrowing down. It will not. Yet the Government have to pretend that it will. Why make that pretence in the first place? We are already suffering the consequences of having what I think is the second lowest public sector borrowing requirement in the advanced industrial world. We are already suffering the consequences of a deflationary stance. Why go on to make that worse when what we need is Vivien Nicholson, the major pools winner of the 1960s whose slogan was "spend, spend, spend", turned into a system of government.
The part of Vivien Nicholson is already being played with great effect by that supreme actor, Ronald Reagan, in the United States with a deficit, which any Keynesian such as myself, particularly a super-Keynesian—perhaps that is what President Reagan is — would approve of wholeheartedly. The result has been to bring down unemployment in the United States by 7 million. That option would be available to us were we not so fixated on unobtainable objectives and so busy pretending that we will achieve those objectives in the next three years.
Mr. Yeo: If the hon. Gentleman wishes to follow the policy of spend, spend, spend, will he remedy the deficiency left by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and say to exactly what level his party is now advocating that public expenditure should rise?
Mr. Mitchell: All that the Government have to justify their policy is the endless asking of questions, such as how much the Opposition would spend, yet we are not in charge of the books. I would spend generously, liberally and even massively to stimulate the economy. If there is a deficiency of demand, as there is, the only way to remedy that deficiency is to spend. It is the only way out. It makes straightforward sense. That is what Reagan is doing in the United States.
The only growth that Britain has is a product of President Reagan's sin in the States — his enormous deficit financing which has stimulated the United States economy and is in turn stimulating our exports to that economy. We are not doing as well as other countries—
Sir William Clark rose—
Mr. Mitchell: I shall not give way again. I am bringing my remarks to a close.
Keynesianism still works and the American experience proves that it works. To ask me now to put a figure on it is the most arcane kind of childish politics imaginable. The Government's stance is far too restrictive and deflationary. We need to expand, and the only way to do so is by borrowing. The only way that we shall keep any recovery going is by stimulating it further with public spending not only on the infrastructure, which is creaking and groaning and needs massive repair, but on housing. What a folly it is to have building workers out of work and houses that want building, and all the things that need doing around our communities, when the unemployed are available to do them. All we need is to spend the money to bring the resources together with the people, get the job done and stimulate the economy in that way.
I cannot see why, unless it is the absolute certainty of the second-rate mind that possesses the hon. Member for Suffolk, South (Mr. Yeo), the lesson that was so clear in the 1930s is not clear today. Everything points to an expansion triggered by public spending and sustained by low interest rates. At the moment, interest rates are crucifying not only the house buyer but anybody with an overdraft, anybody who wants to invest and the whole economy. It is wrong that the economy should be crippled by interest rates. Why have our interest rates been increased to a level well over twice that prevailing in West Germany, our major industrial competitor? We already run a deficit on manufactured trade of £5,000 million a year with West Germany. We are becoming an industrial colony of West Germany and we are making that situation worse by keeping the pound overvalued against the deutschmark and crippling our industry with high interest rates.
The expansion must be triggered by public spending and sustained by low interest rates and a competitive pound. That is the only way to stop the decline which is now going on into a bitter, divided society, characterised by the kind of industrial war that the Prime Minister has triggered off in the mining industry. More important, that is the only way to rebuild the economic and industrial strength of this country which has been so wilfully thrown away by this wasteful Government.
Several Hon. Members rose—
Mr. Deputy Speaker (Sir Paul Dean): Order. The 10-minute limit on speeches is now in operation. I appeal for the co-operation of hon. Members.
7.10 pm
Sir Michael Shaw: I shall not take up the comments of the hon. Member for Great Grimsby (Mr. Mitchell), though I shall be referring to local government expenditure.
I add my congratulations to my hon. Friend the Member for Enfield, Southgate (Mr. Portillo) on his maiden speech. I share his doubts about the value of an autumn statement, because last year's statement turned out to be a PR man's El Dorado; hon. Members have been bombarded ever since with the fears of constituents and others about what might finally appear in the Budget.
I have wholeheartedly supported the Government in their objectives of bringing down inflation, encouraging

711
and modernising industry and creating the ability for us to compete in world markets. Achieving those aims, particularly given the position in which we found ourselves in 1979, has called for firm policies and a courageous Government to carry them out.
It is significant that the country understood the difficulties and continued to support the Government. However, the success of those policies has been delayed and we must show that what we are doing is not only essential, but is producing the results that were promised to the country.
The chief reason for the delay in the success of the operations is the miners' strike. The effects of that strike have been tragic for the British people. The strike has affected their attitude towards the Government's policies and, much more important, it has had serious effects on the industries connected with mining.
What would have happened if we had had, to take the figure quoted by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), £3·5 billion available for construction work and the creation of new businesses and new jobs — in other words, money for something creative, rather than the preservative emergency measures that we have had to take in the past year? The Government's policies are succeeding, but they would have been more clearly seen to be succeeding if that money could have been used profitably in the past year.
I disagree with the suggestion of the hon. Member for Great Grimsby that we would have been wise to follow the American example. The United States' difficulties are growing and it has advantages, particularly advantages of size, which we cannot match. Above all, the United States has sufficient strength to ensure that when the difficulties come, the rest of the world will share them. Again, we cannot do that. We must make sure that we get our policy right.
Having expressed my general support for what the Government are seeking to do, I hope that the Government will note my anxiety about one aspect of their policy. As we have a strong policy, we must make sure that we fully understand its effect and the problems that it is trying to solve. We must monitor that policy and be prepared to change it as circumstances change.
Let me give two examples. I take both from periods of Conservative Government, because I cannot see in the period 1974–79 any continuation of carefully thought out policies, only a series of emergencies, with frantic policies to put a finger in the dam. In 1970, it was felt that we should expand our business activity. We duly primed the pump and the policy was effective. However, there was a longer time lag than had been expected and the policy was, unnecessarily and unwisely, continued. Had that time lag been recognized — and we must carefully examine the effects of our policies — the over-priming of the economy would not have taken place.
In 1979, we faced the serious problem of inflation. The Government took determined and effective action. High interest rates and credit restrictions were quickly effective in the private sector, but not in the public sector. A true reading of that situation was that while high interest rates were effective in the private sector, political considerations were the dominant factors in public sector borrowing and spending. As a result, the private sector was squeezed
712
for too long and considerable damage was done to some of our industries, including the textile industry and others engaged in exports.
What I am saying is that policies and definitions must continually be matched against the changing facts. That leads me directly to the public sector borrowing requirement. To listen to some people, one would think that the Government are refusing to invest money in anything. That is not the case. We are investing large sums in the public sector. It looks as though capital spending overall will probably have been a record in 1984. Much of that was in public sector investment.
However, there must be a discipline within which the Government have to operate and, within that discipline, there has to be a limit to the PSBR. My concern is whether the present definition of public sector borrowing needs to be re-examined. Different situations may demand different solutions.
For example, if credit is tight and both the private and public sectors are being restrained, a simple definition may suffice. However, if there is no monetary squeeze in the private sector, the definition of the public sector and the conditions applying to it need careful examination if unnecessary damage is not to be done.
I appreciate that this is a difficult area and I have no easy solutions to offer. However, I believe that it is an area which must be examined continually, particularly at the present time. Obviously, privatisation provides an answer, because it takes an undertaking into the disciplines of the market place.
I particularly noted a comment made during the recent debate on water authorities. It was said, "Whatever the difficulties, we will look at switching the water authorities into the private sector, and that will ease the problem as they will no longer fall within the public borrowing sector." But those water authorities would still be operating within the economy as a whole. It would seem to me that one cannot argue that there is a case for different treatment and for different limitations just because a body moves from one sector to the other under those circumstances. For other investments within the public sector—
Mr. Deputy Speaker (Sir Paul Dean): Order. I must ask the hon. Gentleman to come rapidly to a conclusion.
Sir Michael Shaw: I hope that my right hon. and learned Friend the Chief Secretary will continue to look at the definitions that I have outlined, and that his policies will have the success that they deserve.
7.20 pm
Mr. Mark Fisher: I join other hon. Members on both sides of the House in paying tribute to the hon. Member for Enfield, Southgate (Mr. Portillo), who made his maiden speech today. He certainly added to the quality of today's debate, and with his undoubted expertise, I am sure that he will contribute considerably to the quality of our debates on all economic matters.
This debate on public expenditure should be the most important of the financial year, and should be the best attended, but the attendance on both sides of the House is a grave disappointment, especially as public expenditure lies at the very heart of Government policy and of the difference in the political policies of the Government and

713
the official Opposition. The Government believe that a reduction in public expenditure will suppress inflation, will lead to industry becoming more competitive and will thus lead to jobs. It is true that the Government have suppressed inflation—it is the one thing to which they can lay claim—but they have yet to deliver any of the benefits which they have claimed, during the past few years, would flow from that.
We believe exactly the opposite, that an expansion of public expenditure will lead not only to a growth in the number of jobs but to industry becoming more competitive as investment goes into research, plant and machinery. Those are all areas which the Government are foolishly and gravely neglecting. Such an expansion in public expenditure would also have the added benefit of improving the quality of life for all our people.
As a contribution to that debate, this White Paper is not a success. On the very day that it was published the Opposition's great friends, the Financial Times, the Daily Telegraph and The Times described it as "wishful thinking", "shoddy" and "misleading". The Chief Secretary smiles, but he received similar treatment at the hands of the Select Committee, albeit in terms of the all-party eloquence and politeness for which it is famed. He and his officials had a fairly rough time when giving evidence, and had an even rougher time, albeit in Select Committee-ese, in that Committee's report.
Interestingly enough, the Chief Secretary dwelt on the whole question of capital spending and infrastructure. He rightly said that "infrastructure" was becoming something of a cliché, that there were many generalised protestations about the infrastructure, and that very little analysis was made of where the infrastructure was weak and of the effects of investment on different parts of the infrastructure, particularly with regard to employment.
I shall concentrate on one area, Stoke-on-Trent, which I have the privilege to represent. I shall try to see what effect investment in the infrastructure might have on that community, on services and on the quality of life on those who live in that city. Wherever one looks in Stoke-on-Trent, one sees the infrastructure in decay—1·5 million sq ft of empty industrial buildings, two thirds of which were built before the second world war, and spoiled land that needs reclaiming, even though our city has the best record of land reclamation and consistently won European awards for that during the 1960s and 1970s. Large tracts of land still need reclaiming, and the building costs on that land are £60 a square metre higher than anywhere else in the United Kingdom. Wherever one looks in Stoke-on-Trent, one sees old houses. The need for infrastructure investment is obvious to everyone. In Stoke-on-Trent "infrastructure" is not a cliché or jargon, but a physical necessity for the life of industry in that city and for the people who live there.
In looking at the problems, I have been aided by an interesting book, which I commend to the Chief Secretary. However, I suspect that he has seen it. It was published last October by the Policy Studies Institute and is called "Rebuilding the Infrastructure". It makes a detailed study of three areas — Teesside, Southampton and Fareham, and Stoke-on-Trent. It makes horrifying reading with regard to all three areas. Stoke-on-Trent has 26,000 houses which were built before 1914. Furthermore, 10,000 of them are unfit or substandard. We have 30,000 houses in the local authority sector, 8,000 of which were built before 1939. Many of them do not have inside toilets or separate
714
bathrooms, and many need rewiring and central heating. On any estate in my constituency one can see that putty is missing from windows, that there are broken downpipes and that there is often no lead flashing.
For the people of Stoke-on-Trent, the infrastructure lies at the heart of their lives. Last year, but 150 units were built in the public sector. That was the response, not because the local authority is unwilling, and not because there is a lack of finance—the local authority has £12 million of capital receipts which it would love to spend on public sector housing—but because the Government say that the money cannot be spent in that area. Is that really what the Chief Secretary wants to say to the country and to local authorities? Is he really saying that, however bad their housing and however manifest their needs, the money shall not be spent? That is the effect of the Government's policy, and that can be shown by the Government's figures, which are to be found in table 371, where the spend on housing is shown to have fallen from £4,522 million to £2,290 million.
Wherever one looks at the infrastructure—at health, highways, sewerage, land reclamation, urban renewal, education, the social services and particularly industrial building — the same story is told. There is a desperate need, and the Policy Studies Institute has come to the conclusion that £20 million a year needs to be spent for each of the next 15 years to get us to a reasonable standard of living. The need is there, and that is not a political, fantastic or irresponsible view, but a view that says that Money should be spent on the detailed infrastructure and capital services of our city.
The Government will not invest and will not even allow local authorities to invest their own money. If the Government's solution to Stoke-on-Trent's problems is that the private sector should invest, I must tell the Chief Secretary that it is not investing in those areas of the economy. Private sector investment is undoubtedly going on in the pottery industry and in some of our manufacturing industries, but investment is not being made in, for example, housing, land reclamation and new industrial building. The private sector alone cannot cope. There must be co-operation between the public and private sectors. The only solution to the problems presented by the squeeze on capital expenditure and by the White Paper is a totally new deal for local authorities and a new deal and spirit of co-operation between local authorities and local institutions, such as banks and pension funds, so that new competitive energy can be injected into investment in the public sector and into the infrastructure of cities such as Stoke-on-Trent. Nothing less than that will do.
If we are to give local authorities that role, and if we are to give the private sector an opportunity to play a part with the local authorities, there must be local planning. There must be planning agreements so that the skills are there to implement the sort of detailed infrastructure development that I envisage.
The White Paper simply will not do. It expresses the intention to continue squeezing public expenditure, in spite of advice from the Government's friends in the CBI and the British Institute of Management, and in spite of all the evidence. The Government are fooling themselves. Investment in research and microtechnology in West Germany and France is two or three times greater than it is in the United Kingdom. Nobody believes that the White Paper even begins to address the problem of dereliction,

715
under-investment and the challenges of the future which the country presents to the Government, but to which the Government refuse to rise.
7.30 pm
Sir William Clark: The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) treated us to a good constituency speech on why his constituency should receive more money. His authority can spend 20 per cent., or £2·4 million, of its £12 million. It is, therefore, unfair and untrue to say that it is not allowed to spend its own money.
Opposition Members talk about the public sector borrowing requirement and overspending as if they do not matter. They suggest throwing money at every difficulty. That has been tried in France recently and we know what happened there. It is no good trying to compare our economy with that of the United States. The troubles for the American economy are growing daily. Mr. Paul Volcker knows that.
The control of public expenditure troubles some of my right hon. and hon. Friends. We all agree about the need to control it, but we fall out over the specifics. That is when the trouble starts. I agree with the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) that when we took office public expenditure was about 39·5 per cent. of GDP and that next year it will be about 41 per cent. of GDP. We want to bring that figure down.
I congratulate my right hon. Friend the Member for Worthing (Mr. Higgins) and his Committee on reporting with such speed so that we can use today the information that he and his colleagues have so carefully sifted. I agree that we must do something about the presentation of our national accounts. To say that total expenditure this year will be £132·1 billion and not include interest is ridiculous. The interest should be included.
Many of us would also like a detailed investigation into what can legitimately be considered as capital expenditure. That should be taken out of revenue and presented to Parliament. The overall figure for overspending will be the same, but we should then be able to differentiate between pure current expenditure and capital exependiture. In that capital expenditure account I should like capital sales to be included.
Has a reserve been made for the increased Government liability on index-linked bonds issued since their introduction? I understand that only 2 per cent. or 2½ per cent. of an index-linked bond with a 2 per cent. or 2½ per cent. coupon is included in public sector borrowing accounts. The inflationary element is not taken into account. I hope that the Minister can give a firm answer about that. Where, if anywhere, does the inflationary element of an indexed-linked bond appear in our national accounts?
Of course we must have detailed control of all spending. I have long been an advocate of a Treasury watchdog in every Department. I say this in kindness to my right hon. and learned Friend the Chief Secretary because he has an awful job each autumn trying to balance the books, to keep the peace and to retain friendships with Ministers. The Treasury should operate like any other large organisation and put a financial director into every subsidiary—or Department.
716
I welcome the White Paper's comments about fewer civil servants. However, I am worried about the increase in employment in the Health Service and other public sectors. I welcome the investigation being carried out by the Secretary of State for Social Services. My information is that the Secretary of State has appointed 12 area managers who will be in complete control. I am worried because 11 of the 12 have been recruited from within the Health Service and only one from outside. I thought that the idea was to inject more business and administrative expertise into the Health Service.
In the White Paper next year it might be a good idea to include comparative mapower totals for each of the Departments so that we can judge from where the increase in manpower has come. My fear, which is shared by many of my right hon. and hon. Friends, is that too many administrators exist and too few people serve the public directly. We spend about 43 per cent. of our total expenditure on the Health Service and social security. That must be examined.
In the next year or so we must investigate earnings-related pensions. They are a contingent liability which might become insupportable for the taxpayer in the next 10 to 15 years. The Government must do everything possible to encourage private and occupational pensions. It would be ridiculous to tax pension schemes or funds in the next Budget because that could push more and more people on to the state system. Of the 9 million state pensioners, about 1·6 million receive supplementary benefit.
If the occupational pensions industry goes down, more and more employers will contract back into the state scheme, more and more employees will be dependent when they retire on the state pension and more and more people will need supplementary benefit. There is a huge contingent liability for the future generation of taxpayers.
I shall not rehearse the Opposition's deplorable financial history when they looked after our finances. Let us not make party points—[Interruption.] At least, we should not make them so patently. The Labour Government went to the IMF. They seemed to like going to the IMF and the World Bank. Their gross, incompetent handling of our financial administration made them go to the IMF.
I remind Labour Members that in the last five or six years our overseas investment has increased tremendously—by far more than we have received from North sea oil—and it is clear that no investment in this country has ever gone short of money if it has been a profitable enterprise. Nor should they forget that the investment that we make abroad is all profitable. It brings in not only dividends but export orders as well.
Labour Members have a bit of a nerve in tabling an amendment such as that which is before the House. It is clear from the Conservative record of the past few years that we have weathered the recession, GDP is up, real incomes are up, inflation is down, overspending has been reduced, social security benefits in real terms have increased, the rate of owner-occupation has gone up by nearly 2 million people, and nearly 2 million people are new share owners.
We need more control of public expenditure, but I urge the Government not to change their economic strategy because it is clear that it is working.
7.42 pm
Mr. Stuart Bell: I hesitate to comment on the remarks of the hon. Member for Croydon, South (Sir W. Clark) because when he described as deplorable the economic situation that the Government had inherited, I thought that he was talking about the situation that faced the incoming Labour Government of 1974. That Government inherited a massive balance of payments deficit, rising unemployment, increasing inflation and a miners' strike. We had the suspicion then — I believe that it has since been confirmed — that the outgoing Heath Government had opted for an election knowing that had they waited another 18 months, the inflation, unemployment and balance of payments figures would have become apparent.
Sir William Clark: That is incorrect.
Mr. Bell: The hon. Member for Croydon, South says that I am wrong. I listened to him. I trust that he will listen to me.
The hon. Gentleman spoke of France and Spain with reference to the speech of my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher). The hon. Member for Croydon, South should know, from his knowledge of economics, that Spain and France face a difficulty that does not confront us. They have constraints on their balance of payments. They have the orthodox problems that confronted us in the 1960s and 1970s—balance of payments deficits—which we no longer have because of North sea oil. Therefore, his comparison between Britain and the Socialist Governments of Spain and France has nothing to do with ideology or doctrine, but simply with balance of payments constraints.
I am tempted to say that I shall miss the hon. Member for Croydon, South in the deliberations of the Standing Committee on the Finance Bill. Indeed, I am tempted to say that I shall miss the Chief Secretary, too. However, I had better not say that too loudly, lest one of the Whips hears me and puts me on that Standing Committee again this year; then again I might see the sun rise over the Thames after protracted deliberations of that Committee, as happened last year.
Whenever I listen to the Chief Secretary I am reminded of those immortal words of the American writer, Emerson:
"The louder he talked of his honour, the faster we counted the spoons."
The more the Chief Secretary speaks of financial rectitude, the more we count the cost in terms of higher unemployment.
The right hon. and learned Gentleman described his policy as representing prudent financial arrangements, being a sustainable level of public expenditure with a reduction in the level of public borrowing. He said that the health and social services programmes would be maintained in broad terms.
The right hon. and learned Gentleman did not have any kind words for the heads of nationalised industries and those who work in those industries. He said that total external financing of the nationalised industries should fall from 1984ߝ85 through to 1987ߝ88, and we know what such a fall means for those who work in those industries. Those people are entitled to know whether the Government intend to drain the nationalised industries of finance and whether that drain will result in more jobs being lost in the public sector. Will the people in those industries have job security or will that, too, be destroyed?
718
The Chief Secretary perceives the role of the nationalised industries entirely in financial terms. That is the cause of many of the troubles facing the Government. They deal only in financial terms. Indeed, as I listened to the right hon. and learned Gentleman, I heard echoes of Neville Chamberlain making the same sort of statements in the 1930s.
The Chief Secretary asked the non-rhetorical question: what return can we expect on the enormous investment in the public sector? That kind of thinking gave us the miners' strike. The right hon. and learned Gentleman pointed out that the private sector invested and expected a return. My hon. Friends and I believe in a social as well as a financial obligation. In our view, the two can be married for the benefit of the nation as a whole.
The right hon. and learned Gentleman poured scorn on the idea of increasing investment for infrastructure purposes. As my hon. Friend the Member for Stoke-on-Trent, Central pointed out, a Policy Studies Institute document referred to the infrastructure problems that we have on Teesside. The hon. Member for Stockton, South (Mr. Wrigglesworth) will, I am sure, develop that point if he has an opportunity to speak in the debate.
As a former Newcastle city councillor, I know that throughout the northern region we desperately need to repair school buildings, for example, that have steadily deteriorated since 1979, being the first casualty of Conservative Government cuts. Many houses need renovating; we must provide appropriate lighting and security in blocks of flats which lack both; and we must cure dampness in many houses. That work, together with repairing the roads, will require infrastructure investment of perhaps £350 million. By spending that money, we will improve facilities for school children, for the tenants of council houses and for users of the roads. But all that money will go into the local economy for the benefit of the people.
In Middlesbrough, almost every family I visit has an unemployed teenager. Those teenagers would benefit from a different orientation of the Government's public expenditure plans as laid out in the White Paper. They would, of course, benefit enormously from a £350 million investment programme in the local economy.
The Chief Secretary referred to lower unit costs in the administration of social security. Although he boasted proudly about that, he did not carry his financial logic much further; otherwise he would have referred to the delays that have become apparent at the sharp end of social security. He might, for example, have referred to the recipients who wait in the queues, and those who rind themselves entangled more and more in bureaucratic red tape. I am sure that they will be pleased to know that the right hon. and learned Gentleman has lowered unit costs in social security.
The Chief Secretary explained how local government expenditure had risen by 10 per cent. in cost terms since 1979 and how, since 1979, manpower had fallen by 4 per cent. But how has the Government's manipulation of public expenditure affected, for example, council housing? As my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) pointed out, when the last Labour Government left office, 264,000 starts had been made in public and private housing. That figure is now down to 190,000.
In my constituency, as the result of Government policy and financial constraint, there will be no new council

719
house starts this year. That can only mean longer waiting lists and longer waits on those lists for those in urgent need of public housing, all building up the sense of frustration in the local community.
The right hon. and learned Gentleman paid scant attention to the medium term financial strategy of the Government. He referred to it in passing by saying that MTFS gave rise to "a range of uncertainty". After five years of MTFS, we have that admission from him before he hurries on.
The MTFS cannot achieve the aims that it sets itself. It cannot achieve a lower rate of inflation at the same time as creating more jobs in the economy. It cannot and has not created sustainable growth. We are asked many times by Conservative Members, "What would you do if you were in government?" If we were in government, we would not try to do the things that the present Government are attempting. When we get hold of the economy—we shall do so because the tide will turn against the Government—we shall increase public expenditure to an extent that is consistent with the needs of the economy and the investment plans of a Labour Government. We shall take into account the money that we shall get back through the imposition of appropriate exchange controls and the growth rate that we expect to achieve.
The Government are running into serious difficulties, and those difficulties are compounded by the White Paper. The Government are running into trouble, and that is not because their presentation is wrong, because they are incompetent or because they are inefficient. It may be that the Government are all those things, and I am sure that my colleagues would concur. But the Government are failing because their policies are wrong. Therefore, no amount of competence, efficiency or presentation, to which the hon. Member for Croydon, South referred, will save them. As the Chief Secretary said, time moves on. When time moves on for the Government, it will move them out.
7.52 pm
Mr. Alan Howarth: I add my congratulations to those already expressed to my hon. Friend the Member for Enfield, Southgate (Mr. Portillo) on a most impressive and interesting maiden speech. As an old friend and colleague of my hon. Friend, it gave me particular pleasure to hear him and to note the warm reception which he was given in the Chamber.
It is an inexhaustible pastime for those who are that way disposed to pore over the tables and the small print of the public expenditure White Paper and its predecessor documents, to compare one with another and to deduce, according to taste, that the Government are continuing with their doctrinaire and heartless massacre of the public services or that they are feebly failing to control public expenditure.
For my part I believe that the Treasury and Civil Service Select Committee has made some shrewd points about the shifts to which the Treasury has been put to maintain the appearance of keeping to the Government's planning total. That is useful for all concerned. If my right hon. and hon. Friends in the Treasury have one anxiety, it is surely that there are too many people, participants in the political market place if not the financial market place, who believe that there is scope for a significant relaxation in our public finances.
720
We have seen two characteristic instances of this in recent days. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was reported in the weekend press as calling for increases in social benefits and in public sector capital spending. As this afternoon, he declined to set a cost to this programme and its consequences. In his heroic style, he simply insisted on nothing less than substantial, nay massive, increases.
The leaders of the alliance parties are more exact, or perhaps more naive. They unveiled on Friday their mock Budget, which featured a demand for reflation amounting to £4 billion. They claim that by waving this wand, or starting the printing presses, unemployment will be reduced by 500,000. In the formulation of the right hon. Member for Plymouth, Devonport (Dr. Owen), this will be done without triggering high inflation. As the alliance parties acknowledge that the consequence of their policies would be to increase inflation to 6·9 per cent., it would be interesting to know whether the right hon. Member for Devonport or his colleague, the hon. Member for Stockton, South (Mr. Wrigglesworth) regards inflation of 6·9 per cent. as low or even acceptable. The unease of alliance spokesmen is betrayed by their suggestion that any awkward consequences of their policies can be averted by the devices of full membership of the European monetary system and the institution of a two-tier scheme of interest rates.
There are many reasons for the relative economic failure of Britain. One of the reasons is what I might call the Wilsonian assumption, of which hon. Members of the SDP are the primary legatees, that economic policy is a matter of ingenious wheezes. Another reason is that public expenditure has been allowed to take far too large a proportion of our national wealth.
During the period of Conservative Government in the 1950s, when public expenditure accounted for a third or less of GDP, Britain became rapidly more prosperous. Those were the days when a Tory Chancellor of the Excechequer, Lord Thorneycroft, could resign on the issue of a £50 million excess over the planning total. Now we have an interesting dispute between the Treasury and Civil Service Select Committee and my right hon. and learned Friend the Chief Secretary over whether public expenditure is or is not £17 billion above what it was planned to be.
The precise extent of the overspend is far less important than the necessity for an unblinking recognition that public expenditure has increased, is increasing and ought to be diminished. The Government used to say that it should be diminished absolutely. With the 1982 White Paper, the Government said that public expenditure should be reduced as a proportion of GDP. The reality is that since 1982 even that has not happened. It is projected in this White Paper that by 1987–88, after two terms of Tory Government—these are the Government's assumptions, which represent a considerable assertion of hope over experience—public expenditure will be back to 39·5 per cent. of GDP. We shall be back at square one, where we began in 1979. Public expenditure at 39·5 per cent. of GDP, let alone the 41 per cent. as postulated for 1985–86 in the White Paper, is ruinously high.
It is not that there is any precisely quantifiable and predictable causal connection between a particular planning total and the PSBR and the indices of interest rates, sterling and so forth, by which we are so mesmerised. It is that with public expenditure in the region

721
of 40 per cent. of GDP we are in a realm of high taxes, high interest rates, endemic inflation and appallingly high unemployment. This is a stifling, unhappy and degenerative condition.
The condition is degenerative because the public sector cost of alleviating the evils of inflation, poverty and unemployment, which are themselves the consequences of an excessively burdensome state, compound the problem. Week by week, Members of Parliament capitulate a thousand times to local special pleadings—the retention of an uneconomic pit or an uneconomic maternity home here, an extra bypass or an extra leisure centre to be squeezed into a programme there. Week by week the organised lobbies become more importunate. The word processors grind and churn out letters to every one of us. They churn again to produce letters to our constituents urging them to write to us to complain about cuts and to ask for additional spending. All the time the onward momentum of indexed benefits and subsidies exerts upward pressure for increases in taxes, interest rates and inflation. The public sector grows, but the resources which are in the public sector, because they are not subject to market disciplines, are used relatively inefficiently. The result is that we proceed further into economic debilitation, competitive failure and unemployment.
My right hon. and learned Friend the Chief Secretary reflected mournfully in his evidence to the Select Committee, and again this afternoon, that over 20 years the average annual increase in public spending was 3 per cent. He was hardly more cheerful when he observed that since 1979, since the Conservative Government have been in office, it has been 1·5 per cent. The Select Committee argues that the average has been maintained at 3 per cent. even over that period.
In his evidence to the Select Committee my right hon. and learned Friend the Chief Secretary also alluded to last year's Green Paper on public expenditure and taxation into the 1990s. It was intended to outline options and to initiate debate for the future. Irrespective of whether the Green Paper provides the text, we need urgently a debate on the future pattern of public expenditure.
Broadly, there are two options. One option is to stagnate in a state-dominated and increasingly feeble economy. The other option is to embark on a systematic strategy to limit the role of the state to those functions which are necessary and which only it can undertake. The second strategy, which is the one that we should adopt, would mean that the state would concentrate on doing what it has to do and doing it better than it does now. It should concentrate on the relief of poverty, the maintenance of the security of the realm — law and order, defence and the promotion of Britain's interests abroad. It would concentrate on maintaining in proper condition the institutions of justice and of capitalism. It would concentrate on ensuring the proper provision of infrastructure and basic utilities.
The state would do all those things better than it does now, and the state should progressively withdraw from functions which it should never have undertaken. In particular, it should cease to pay out subsidies other than to the poor. In the White Paper, £5·6 billion is earmarked for subsidies to agriculture, industry, transport, the arts and so on. Subsidies force up prices, distort decision-making, and generate political clients whose demands are insatiable. We should have a determined programme to get rid of such subsidies.
722
Time does not permit me to elaborate upon the programme of withdrawal that I would like to see. In conclusion, I would only say that the Conservative party must give much fuller support to my right hon. and hon. Friends at the Treasury. I do not believe that, with the array of pressures to increase public expenditure as they are, it will prove possible to hold public spending constant in real terms. We therefore need to develop a more confident debate and a more ambitious programme than is set out in the White Paper.
8.1 pm
Mr. Ian Wrigglesworth: I have listened with interest to the hon. Member for Stratford-on-Avon (Mr. Howarth), but I found no justification for his view that public expenditure is inherently bad and leads to low productivity, low economic growth, and higher levels of unemployment and inflation. The hon. Gentleman also believes that if public spending were cut substantially and if everything were left in the hands of the private sector, the whole picture would be rosy. Inflation and unemployment figures would be low, there would be rapid growth, and all our aims would be achieved simply through the operation of market forces.
In this country, as in others, the Government and the private sector—the Government and the markets—must work together. Ideally, they should not conflict with one another but should work together as far as possible. The Government should work with the grain of the market, as Governments in countries such as Japan and Germany, which have been so successful and have outperformed our industry year in and year out, have done so successfully over the past 30 years. The hon. Gentleman provided no evidence that there was any basis for his views in fact or in the experience of other countries.
The Select Committee's report has shown that in their expenditure and other financial White Papers the Government are working on back-of-the-envelope figures. To present the Government figures as though they were the precise calculations on which companies and other institutions operate is to give a grossly misleading impression. If the Select Committee report and today's debate help to persuade the Government to improve the figures given in the White Papers that are published for the information of the public and of the House, so that decisions can be taken on a more rational basis, that will be a change to be welcomed.
We have heard that debt interest — a substantial amount of expenditure for the Government — is not included in planning figures because it cannot be controlled. That fact illustrates my point. Capital assets, capital formation and capital depreciation are not quantified in any way. That shows how farcical it is for the Government to attack their critics by saying that capital expenditure is not important or that it does not have beneficial consequences. That argument is futile, because it is clear that the Government are working with guesstimates just as much as anyone else. They do not have the figures that would enable them to work in a serious and sensible manner.
This is an area of guesstimates but above all, it is an area of politics and political priorities. That is how we should consider the White Paper.
The cuts in the capital expenditure programme—I am pleased that the figures appeared in the White Paper—are deeply disappointing and should be reversed. If the

723
defence figures are excluded from the capital expenditure programme, there are to be cuts of some £700 million in real terms this year, £1·4 billion next year,. £600 million in the following year and another £600 million in the year after that—a total cut in capital expenditure over that period of £3·3 billion in real terms. The defence figures show a slight increase over the same period, so the true figure is even worse.
That is the last treatment that the country should be subjected to over the next few years. As capital assets are sold and as the revenues from North Sea oil diminish, we should be investing more in capital assets rather than cutting back as is suggested in the expenditure White Paper. There is considerable doubt whether the Government will be able to contain their expenditure in programmes such as defence. There is also considerable doubt whether the 3 per cent. public sector pay assumption will be meaningful. It is difficult to see how the Government will be able to achieve even the figures laid out in the White Paper.
That is a major criticism of the Government's strategy, which has rightly been criticised across the political spectrum, by Government Back Benchers as well as organisations representing different parts of the political and industrial spectrum. I hope that the Government will respond to that criticism at some stage and restore some of the cuts imposed on capital expenditure in the White Paper.
The alliance wants an increase in Budget expenditure in order to encourage the economy to grow even more rapidly, to get people back to work and to alleviate poverty. There should be a cut of 1 per cent. in the employer's contribution to national insurance, in order to encourage firms to take on more labour and to help to make firms more competitive. Capital expenditure should be increased by some £1 billion in order, in particular, to restore jobs in the construction industry and to ensure that more imports are not drawn into the country, making our balance of payments problems even worse than they are now, despite the export of North Sea oil.
Current expenditure should be expanded in order to help those who are suffering the most severe poverty. The family income supplement should be substantially increased, and long-term supplementary benefit should be extended to the long-term unemployed. The heating addition to supplementary benefit should be restored and the youth training scheme should be doubled in length, from one year to two. The community programme should be substantially expanded. The number of places on that programme should be increased from 130,000 to 250,000 so that people can be found work immediately and in a cost-effective way. All of that adds up to a programme involving an increase in public expenditure of some £4 billion more than the Government are suggesting. It implies a net increase in the PSBR of £2 billion, but we think that a reasonable increase. The PSBR would grow to only 2·6 per cent. of gross domestic product—hardly a fantastic figure as compared with other Western countries. The economy could stand that without a massive increase in inflation.
The hon. Member for Stratford-on-Avon criticised us for saying that we are prepared to accept an increase in inflation to 6·9 per cent. We believe that that is a modest price to pay for a decrease in unemployment. He might be
724
prepared to tolerate the present level of unemployment into the foreseeable future, but we are not. We are prepared to accept a modest increase in inflation to get some people back to work and to start the growth which could get more people back to work. I hope that the hon. Gentleman will not go away thinking that we favour rampant inflation. The programme that we published on Friday of last week, and all the runs through the model, show that we have chosen a combination of policies that will not increase inflation substantially but will nevertheless start getting people back to work and the economy on the move, thus giving some hope to those who have suffered for the past six years.
8.11 pm
Mr. John Maples: I should like to put my remarks on the White Paper into the context of trying to solve the problem of mass unemployment. In many respects, the Government's economic policy has had considerable success. Inflation is down to 5 per cent. and appears to be steady, the economy is growing at about 3 per cent. and new jobs are being created at a rate of about 25,000 a month. The problem that overshadows all of that is that unemployment is not falling. Unless it starts to fall soon, we shall face a social problem that might take a generation to cure and risk losing the present widespread support for the Government's economic strategy.
People outside the rarefied atmosphere of politics and economics are not much interested in the level of the public sector borrowing requirement, money supply or total public expenditure. They are interested in the real economy of unemployment, inflation and living standards. The statistical measures to which we pay much attention are vital tools in analysing what is happening in the economy and they help to construct policy, but they are not ends in themselves. We are in danger of constructing a statistical straitjacket which leaves little, if any, room for fiscal manoeuvre.
The level of the PSBR does not tell us anything about what is happening in the economy. It has become important because the Government have promoted it as a measure of their success or otherwise in economic policy. I am not suggesting that the level of public borrowing is unimportant, but PSBR targets have tended to concentrate attention on the arithmetical difference between revenue and expenditure while often ignoring the different economic effects of different items of taxation and spending. Those qualitative differences in fiscal policy have a far more important effect on the economy than the total of the PSBR. Similarly, concentration on public expenditure totals seems to imply that all types of spending have the same effect, when we all know that that is not so. We know that spending on a capital project, such as the M25, which reduces private sector industrial costs, is not the same as paying higher wages to public sector employees. Such distinctions tend to be forgotten when we concentrate on the total.
Although the PSBR and public spending totals are important, their detailed composition is far more important. There is no correct level for the PSBR. It is projected to be 2 per cent. of GDP next year. That is arguably low. The effect of the current level of unemployment on the PSBR is about £15 billion. If we could halve unemployment, the PSBR would disappear. That seems to lead to the conclusion that it might be worth

725
having a modest short-term increase in the PSBR if it led in the longer term to lower unemployment and a considerably lower PSBR.
In a speech to the Zurich Society of Economists in 1981, my right hon. Friend the present Chancellor of the Exchequer, said:
"in a recession it would be wholly appropriate, and wholly consistent with declining monetary growth, for the PSBR to be allowed to rise above the medium-term trend line.
I should have thought that that was as good an authority for greater flexibility of the PSBR as one could get. It is vital that any extra borrowing is used to finance measures that directly promote growth and employment, but, subject to that caveat, a higher PSBR would give fiscal room for some form of job-creation package in the Budget.
Some people argue that increases in the PSBR lead automatically to increases in interest rates. The evidence is not on their side in regard to a modest increase in the PSBR. This year's overshoot of £ 1·25 billion did not lead to an increase in interest rates when it was announced in the autumn. The recent increase in interest rates has been due far more to what has happened in the United States and to money supply factors here. Some of those factors, such as the rate of domestic credit expansion, are, to a large extent, under our control, but many, such as oil prices and the level of American interest rates, are not. Whatever the causes of rises in interest rates, marginal differences in the level of the PSBR are not one of them. I doubt whether £2 billion either way on the PSBR makes as much difference to the level of domestic interest rates as a speech by Sheik Yamani on oil prices or another by Mr. Henry Kauffman on the prospects for American interest rates.
The commitment to no real growth in the total of public expenditure has led to concentration on the total at the expense of the components. As a result, the components tend to be treated the same. I accept that control of public spending is a vital factor in promoting growth. The idea that our economic problems can he solved by a massive increase in Government spending is dangerous nonsense. However, the control is needed in respect of those items of current spending which are in the nature of an overhead on the economy. In practice, it appears that current spending on most programmes has increased and the total has been kept in line by reducing capital spending and increasing asset sales. Qualitatively, we cannot balance increases in current spending against reductions in capital spending.
The Select Committee report shows that, during the past five years, current spending on goods and services has risen by 16 per cent. in real terms, that transfer payments have risen by 22 per cent. and that general Government fixed investment has fallen by 15 per cent. Capital spending is predicted to fall further during the next two or three years. That is a crude qualitative distinction of different types of public spending, and I do not mean to imply that all capital spending is good and that all current spending is bad. Nevertheless, that illustrates the qualitative effect that is disguised by concentrating on the total of public spending.
Last year's public expenditure White Paper showed capital spending remaining static in real terms. This year's shows a decline in real terms from £21·8 billion in 1983–84 to £18·5 billion in 1987–88. Those figures include defence capital spending, which I believe is not counted as capital spending in national accounts. Omitting defence spending, one discovers that, at 1983–84 prices, capital spending has
726
fallen from £20 billion in 1978–79 to £16 billion this year—and it is predicted to fall to £13·5 billion in 1987–88. That is a fall of 20 per cent. during the past five years. If that trend is continued, capital spending will have fallen by one third from 1978–79 to 1987–88. That is an enormous reduction and shows how an apparently steady total can disguise widely different effect.
All items of public expenditure should be evaluated in terms of their effect on industrial costs, economic growth and employment. Those areas of public spending that do not have a beneficial effect should be tightly controlled to give scope to allow the beneficial items to be expanded, or at least not reduced.
I should like to draw those two points together by suggesting that we could have a slightly higher PSBR without an adverse effect on interest rates if the extra money were productively spent in pursuit of increased economic growth and employment. Tackling unemployment is surely now the overwhelming policy objective. If we settle for a PSBR of £10 billion with an implied £1·5 billion fiscal adjustment built into the autumn statement, the Chancellor would have £4·5 billion with which to finance a job creation package in the Budget by a combination of carefully targeted tax reductions and public spending increases. My preference is for cuts in employers' national insurance contributions, increased home improvement and urban renewal grants, more, positive industrial and trade policies and changes in our education and training system. All those measures would help to create new employment in the private sector and enhance economic growth.
No hon. Member would pretend that we can create 3 million new jobs overnight, but it is important that we start to develop practical and imaginative policies to reduce unemployment. I have suggested a modest programme wholly consistent with the Government's overall economic strategy. Whatever we decide to do, it is important that we do not place ourselves in a statistical straitjacket of overall PSBR and spending targets which effectively allow us to do nothing.
8.21 pm
Mr. Peter Hordern: The House has had some harmless amusement in poking fun at the public expenditure White Paper. I shall not continue that trend because I am sure that the points have already been well made. We have seen an acceptance over a long time that public expenditure programmes should remain more or less as they have been for some years. I do not believe that anyone is satisfied with that approach. I cannot find anyone who feels that the Government are spending enough on a particular programme. Although my right hon. and hon. Friends on the Treasury Bench take credit for controlling public expenditure — I applaud their efforts—they do not seem to be satisfying many people.
We are often told that we should follow the example of America, West Germany and Japan and examine the way in which public expenditure is a much smaller part of their gross domestic product. But if one follows the advice of my right hon. and hon. Friends on the Treasury Bench one sees distinct differences between our pattern of expenditure and that of other countries.
I criticise the public expenditure White Paper because all the programmes appear to be set in concrete. Other countries do not spend money on public services in the way in which Britain does, in terms of current or capital

727
expenditure. I believe that, even with the best will in the world, with all the financial management initiatives and the careful scrutiny of departmental programmes as carried on at the moment, we need something quite different. We need a wide-ranging review of the whole of public expenditure by the only people who can really do it—a Cabinet committee formed from the star chamber committee sitting for a long period and examining carefully whether we need to spend money in the way in which it has been habitually spent. We would find that other countries do not spend money in the way that we appear to find necessary.
We should establish our priorities, with one priority being the granting of supplementary benefit payments and subsidies only to low income earners or those with no support. Another should be that employment can best be secured by low taxes and competition.
I should have thought that it was generally agreed that it is a mistake to pay subsidies to millionaires; yet, year in, year out, we continue to pay large subsidies to cereal farmers. I believe that there is a good case for helping the small dairy farmers because they form the social fabric of the agricultural community. There is simply no case for subsidising cereal farmers.
There is no Department of Trade and Industry in the United States or West Germany. I believe that it would be better to amalgamate the Ministry of Agriculture, Fisheries and Food with the Department of Trade and Industry and call it "the Department of Ease and Comfort". Those Departments are in the same business of handing out subsidies unnecessarily. I understand that this year we have spent £627 million in regional grants and that that amount is due to be reduced next year to £401 million. That is pretty good, but it does not mean that I am against regional policy. I am certainly not against regional policy, but I believe that its objective would be better achieved by tax incentives than by indiscriminate grants.
The House has heard criticism of what would happen if the nationalised industries improved their balance sheets by increasing prices. They will certainly do that. I understand that we shall soon receive buff envelopes telling us that our water rates have increased by 10 per cent. There will be further increases of 10 per cent. during the next two years. The same is true of electricity prices. We are told that, on current cost accounting, the electricity authorities earn only 2·6 per cent. I believe that the electricity authorities would rightly say that they have been made to install machinery which they would not have chosen and they are still not permitted to import coal to make a proper return on their assets. Undoubtedly, higher charges and prices will feed through the economy in industrial costs, making imports more competitive, and in increases to the RPI, which will affect pensions and the cost of supplementary benefits. The net beneficial effect is likely to be much smaller than the Government would like.
So far the Government have achieved a good programme of sales of nationalised assets, but I believe that we should take it further. Ministers often use the analogy of what happens in the United States, Germany and Japan. If people in those countries were invited to nationalise the water, electricity and gas authorities, they would think that their Governments had taken leave of their senses, and they would be absolutely right. I believe
728
that we should start to denationalise those large institutions. If we privatised the gas, electricity and water industries, we would receive about £27 billion, using the same analysis that applied to British Telecom. I do not suggest that we should privatise those industries all at once—we should do so over a long period.
Privatisation would not only help the PSBR—that is a particularly desirable objective—but it would keep prices down, because denationalised industries would not need to increase their costs as much as the Treasury wishes. If one took a very conservative attitude, one would reduce the national debt. That would cause a bit of a stir. It has not been done for a long time. I do not suggest that we should reduce the national debt, but if there were more privatisation some of my hon. Friends' suggestions about capital investment programmes in the public sector could be properly followed.
From where will the money come? It will come from the pension funds. Anyone noting the growth in recent years in pension funds would be astonished. In 1979, there was £40 billion in pension funds. I am told that there is now £120 billion. In 1979 the institutions managing the pension funds invested £900 million; this year they invested £6 billion. I do not believe that the pension funds in Britain would not support the buying of public utilities, just as pension funds in other countries do. Think of the opportunity that would present for wider ownership. My right hon. Friends on the Treasury Bench should be following those practical considerations. They would greatly ease the Government's path, and they would not be inflationary. There would be lower prices.
I suggest that such policy should be carefully considered. I disregard what the Opposition have said in their nitpicking criticisms of the Government. I notice that they have been careful not to put forward their own policies. Perhaps that is just as well.
I congratulate my right hon. and hon. Friends on the steadfastness with which they have pursued their objectives. I hope that they succeed.
8.30 pm
Mr. John Maxton: There speaks the soft south-east of England, where perhaps the populace do not depend to the same degree upon public expenditure as do my constituents and many constituents in the north, Scotland, Wales and even the midlands, for the provision of their most basic services. Public expenditure in the main, not entirely, is about providing services for people. If we cut them, the poor, the elderly, the disabled and the young are the hardest hit. It does not hit the well-off—those who live in the big, fat comfortable villas in Horsham; I have been there and I know it—but it does hit those who live in the tenement dwellings in Castlemilk in my constituency, who suffer as a result of the public expenditure cuts.
The hon. Member for Horsham (Mr. Hordern) almost completely misunderstood what public expenditure is about and its relationship to private sector industry. His speech continued the Tory party's vendetta against public expenditure. I only hope that at the next general election — this has been increasingly true in Scotland for two elections—those who are employed in the public sector will turn against the Government and reject them completely. I hope that those employees will do that, not just because they are less well paid than they were or

729
because their standard of living has decreased, but because they are insulted and degraded by the Government, who treat them as parasites.
Anyone employed in the public sector is a parasite. Any teacher teaching in school, lecturer teaching in college, anyone working in direct works departments and social workers are parasites, because the Government consider, as does the hon. Member for Horsham, that public expenditure is wrong. That is all based on the myth that there are two separate sectors — the private and the public. That is not true. The private sector of industry depends more upon public expenditure and the Government expending money on it than the public sector depends upon the private sector to obtain money.
I wrote to Glasgow district council recently about repairs to a privately owned, privately rented tenement in Glasgow. It contains 10 flats, all of which are privately rented and owned by one landlord. The roof is about to collapse, the windows all need taking out and replacing and there is seepage from the brickwork because there is no proper damp course. The flats need to be properly repaired. Glasgow district council has inspected the flats, and it admits that it is almost prepared to put on a public sector order to have them repaired compulsorily. I received a letter from the council this morning, in which it says that it has no money for grants for that work.
I received a letter from the landlord of that tenement last week. I had pointed out that he had a responsibility to ensure that those repairs were carried out. His answer to me was:
"Why do you not use your good offices to get us a 90 per cent. grant from the local authority to ensure that that work is carried out?"
That private landlord is refusing to do his job and carry out his responsibilities as a landlord to ensure that the house is water and wind tight because he cannot obtain public expenditure to subsidise him. He will continue to collect his rents. He will expect every tenant to pay rent. If they do not, he will evict them or try to have them evicted. Here we have a small business man—he is not a millionaire—being subsidised by public expenditure. That is true throughout the building industry.
Some time ago I met the Scottish Institution of Civil Engineers. It was complaining bitterly about Government capital expenditure cuts. That association correctly pointed out that it is entirely within the private sector. There are virtually no publicly owned civil engineering companies or organisations, yet 95 per cent. of the work that they do is paid for by the public purse. The Mossmorran petrochemical complex has just been opened in Scotland. The company building it received large amounts of regional grants and aid to build it. Even within the 5 per cent. of the remaining civil engineering work there is a great deal of public expenditure. The private sector of industry depends almost entirely upon public expenditure to survive. That is true of housing, civil engineering and large numbers of other undertakings.
Tourism comes within the Scottish Office budget. The Secretary of State for Scotland tells us time and time again how important it is that we should increase expenditure on tourism to attract more tourists to Scotland, but the tourist industry depends on public expenditure. The tourist board, the Highlands and Islands Development Board and the Scottish Office give grants to hotels and boarding houses and to those who wish to let their houses for self-catering holidays, but that is insufficient. Although we have had
730
some lovely summers in Scotland, we cannot depend on the sun always being out, and if the weather is bad we rely on public services to provide leisure activities to give us a proper holiday. If they are not there, the tourists will not return.
The Burrell collection in Glasgow has now outpaced Edinburgh castle as the largest tourist attraction in Scotland, yet the Burrell collection nearly did not open because of the Government's refusal to give proper funds to Glasgow district council. The council nearly decided not to open the collection. That would have been an enormous loss to the Scottish tourist industry. That is true of parks, concert halls, subsidies paid to the Scottish National orchestra and many other things to which tourists are attracted for leisure activities. They are almost entirely paid for out of the public purse, yet the Government insist on making cuts.
Members who, like me, represent areas where unemployment is running at 30 to 35 per cent., and where youth unemployment is running at 60 to 65 per cent.—that is true of Castlemilk—have been horrified by the increase in heroin addiction and by the number of youngsters who are now taking hard drugs. The Government shed crocodile tears about it. I admit that they have recently put in sums of money to educate youngsters about drugs, but they have cut—the hon. Member for Horsham knows this as well as I do, because he was on the Public Accounts Committee that examined it — Customs and Excise staff by 3,500 since 1979. I am not saying that all the cuts have been in drug investigation. Of course they have not. However, as the number of staff dealing with VAT collection has been increased, it is arguable that there has been a cut of even more than 3,500 in other activities, including heroin and drug supervision, and attempts to stop it coming into the country.
Equally, there is no question but that one reason for the increase in heroin addiction is the despair, frustration and hopelessness that have been created among many of our youngsters in the areas of high unemployment. They feel that there is no hope and nothing for them to look forward to except unemployment. In the housing schemes, which are being increasingly run down, there are fewer facilities, because almost all are provided for out of public expenditure. Out of despair, these youngsters turn to heroin as at least some escape, some hope, some sort of dreamland in which, at least for a short while, their despair is dissipated. Yet much of that despair and frustration has been created by the Government's refusal to recognise that, at the very heart of our economy, the only way that the economy can move forward is by increasing public expenditure, investing in and repairing our infrastructure, and not, as the Government are doing increasingly, by cutting it back.
8.40 pm
Mr. John Townend: When the Government set out on their radical journey in 1979, a vital cornerstone of their policy was to cut public expenditure so that they could cut taxation and reduce the proportion of the gross domestic product taken by the public sector. The 1980 White Paper confirmed that intention and forecast that expenditure would drop through to 1983–84. We all know that the Government failed to meet their targets. In 1982 they abandoned their policy of reducing expenditure and adopted a policy of keeping expenditure broadly level in cost terms.

731
This White Paper gives the House the opportunity of judging how successful the Government have been in keeping to that less ambitious policy. It is increasingly clear that the Government have failed yet again to achieve their objectives. Even on their own basis, chart 1.2 on the planning totals shows that in real terms those figures have risen in every year since 1979–80 and, in total over six years, by £10 billion. However, if one defines public expenditure along the lines of the Select Committee, and of most accountants, economists and business men, one has to make several adjustments, which were mentioned by my right hon. Friend the Member for Worthing (Mr. Higgins), such as the inclusion of debt interest, allowing for asset sales and making adjustments for the reduction in the national insurance surcharge. When one makes those adjustments, the situation is even worse. In four years, in real terms, public spending has increased by no less than £18 billion. That is 3 per cent. per annum in real terms. So much for the cuts that the hon. Member for Glasgow, Cathcart (Mr. Maxton) talks about. How I wish that there had been some real cuts in public spending.
Paragraph 20 of the Select Committee's report shows that after allowing for those adjustments, spending will be about £6 billion more in the current year than was planned in the 1983 White Paper. I suggest to my hon. Friend the Minister of State that many of the Government's problems stem from the fact that they have failed to achieve their spending targets and then, having failed to do so, they have tried to hide that fact by overemphasis on the planning totals, which do not show a true and fair view of the situation. By failing to cut spending, they have been unable to reduce taxation and we all agree that the burden on the low paid is far too high. By pretending that they are controlling expenditure, the Government have lost much support in many areas and from many bodies for their policy of endeavouring to do better in the future.
I suggest to my hon. Friend the Minister that if the Government came clean and admitted that they had failed to reduce public expenditure and, indeed, to control it, and that it had gone up every year roughly by 3 per cent. in real terms, that would convince more people of the need for further pressure on public spending and that public spending was too high.
In order to keep up the charade that spending is under control, the Government have made tremendous efforts to keep to their planning totals by what we in the Select Committee call creative accounting. Several of the Government's recent political problems have been caused by those efforts. I shall cite two examples. The first is restrictions on local authorities' rights to spend capital receipts and the second is setting new targets for water authorities. If the Government had dealt with departmental spending, especially in the Department of Health and Social Security, those politically sensitive measures would not have been necessary.
Mr. Budgen: Will my hon. Friend give way?
Mr. Townend: No, because I am short of time.
The Government are clearly hoping to do better in future and are proposing, compared with the upturn for this year to reduce spending in the coming year. The Chancellor must excuse me if I tell him that while I support him most strongly, I am slightly sceptical of his likely success for two reasons. First, the 3 per cent. Wage
732
increase, which is included in the White Paper, seems very low unless we get much more demanning in the public sector than in the past. Secondly, the cost of the miners' strike will be much greater next year than was anticipated.
In my view, the only way that the Government will achieve their targets in the next few years is by continuing their pressure on spending. That means thinking the unthinkable. First, we must tackle DHSS expenditure, which is out of hand in some areas. If all the people who were entitled to benefits actually claimed them, the cost would be horrendous. I should like to quote two examples. Housing benefit replaced rent and rate allowance. In 1979–80 the cost was £278 million a year, but in the next financial year it will be no less than £2,800 million. The Government must bear responsibility for much of that because they brought in housing benefit. I am sure that they never anticipated the number of people who would claim that benefit. It is not restricted to the real poor—I understand that about 12 million people collect it. My second example is the board and lodging allowance, which in 1979–80 started off at £62 million and has increased almost tenfold in six years.
I welcome the DHSS reviews. The whole system is too complicated, and spending in some areas is virtually out of control. Most of the public are confused by the multitude of benefits and consequently often fail to claim what they are entitled to. What we need is simplicity and a lower total cost. We shall need some form of cash limit on that heading. That will mean that in areas where we have no commitments, we shall have to end the automatic indexation of those benefits.
The need to restrain expenditure will grow as oil revenues decline. There are several other areas that we should question over the coming years, such as the cost of the EEC at nearly £1 billion a year. It does not seem that we are likely to get complete control of the common agricultural policy. It must be tackled. Until it is, I for one will not vote for an increase in the VAT contribution. Will we really be able to afford Trident? As oil revenues go down, will we continue, year in year out, to spend £1 billion on overseas aid, very little of which—only some 10 per cent. or 15 per cent.—goes on food or famine aid? Are the manning levels in the local authorities really too high? What about the efficiency of the National Health Service? What about considering bringing back the teacher-pupil ratio to what is was when the Labour Government left office? That would save about £170 million in England alone. As we move towards the end of the century, with declining oil revenues, can we really afford the state earnings-related pension? I know that my right hon. Friend the Chancellor of the Exchequer and his colleagues at the Treasury are making strenuous efforts, but often they are fighting a losing battle with their colleagues in the high-spending Ministries. Many Conservative Members strongly support the Treasury Ministers in their efforts to control spending. However, we shall continue to criticise them when they fail to grasp the nettle in those areas which are out of control. In recent months the Government have seemed to be losing their sense of direction. We now need a return to the aims and optimism of 1979. That means lower spending and significant reductions in taxation. They are two vital ingredients for economic expansion and the creation of new jobs.

733
new jobs.
8.50 pm
Mr. Nigel Forman: I shall seek to make a brief and truncated speech. Overall, there are some welcome elements in the public expenditure White Paper, not least the fact that the overall total does not seem to be seriously out of control. I pay tribute to the Government for that. I am also glad to see that it has not been necessary during the past year to have a hasty mid-year adjustment, such as we saw in July 1983, which can be damaging. However, a great deal more can and should be done to increase output, efficiency and the performance of public spending. I shall dwell mostly on those aspects.
I also wish to make a procedural point. I agree with my right hon. Friend the Member for Worthing (Mr. Higgins), who argued that it was preferable to find ways of debating both sides of the public accounts at the same time on a basis of comparable figures at an appropriate stage in the financial year. I hope that such a procedural change may be considered and made by the Treasury.
I have many constructive suggestions to make which arise from paragraph 16 of volume 1 of the public expenditure White Paper. It argues fairly that there are three ways of analysing public spending: where it goes—in other words the programmes; who spends it—the spending authorities; and in what form it is spent—in other words, 40 per cent. on transfer payments, 30 per cent. on public sector pay, 25 per cent. on goods and services, and 5 per cent. on public subsidies. A much more important fourth question, which was implicit in some speeches, but should have been more explicit in volume 1 of the public expenditure White Paper, is: what value do we get for the money we spend? That should commend itself to both sides of the House, if we consider these
To find answers to that vital fourth question we need to consider such things as policy priorities, economic efficiency, social benefits and opportunity costs. In future public expenditure White Papers I should like to see greater emphasis on those aspects. The Treasury documents should make them more explicit.
I shall give some examples because examples illustrate matters better than general statements. Could the Treasury justify the steep real increase in defence capital spending, which has been shown in table 1.13? Can we explain how and why the Export Credits Guarantee Department is supposed to have negative interest support costs by 1987–88, compared with the present position? Why is no attempt made to estimate the rate of return on rail electrification, for example, when road building is said to have a 74 per cent. positive rate of return?
As performance indicators suggest that first degrees in higher education have a real rate of return between 5 per cent. and 8 per cent., why is the participation rate in higher education being allowed to fall? As 11 per cent. of the cost of family practitioner services, but only 1 per cent. of the cost of hospital services, is recouped in charges, does it mean that one is too high, the other too low or both?
Why is no information given this year on the take-up of social benefits, as it was last year? Why is there so little discussion of the alternative economic costs of job-creating measures, when table 3.12.8 shows that each person taken off the unemployment register saves the Exchequer an average of £2,000 in social benefits? How is the increase in benefits to the unemployed to be held at
734
9 per cent. during the review period, when the total of unemployed is expected to remain above 3 million and inflation during the period is expected to be 14 per cent.?
How realistic is it to expect a 7 per cent. real cut in local authority expenditure in 1985–86, and have Ministers considered the consequences of achieving or failing to achieve such a change? Why are there no assessments published of the different rate of return on different investment projects in the nationalised industries?
In short, why has not the Treasury and the rest of Whitehall been required to emulate the excellent work done by the Department of Employment in table 3.4.10 on the relative cost effectiveness of various employment creating measures? That should be the model for all Departments, if we are serious about looking for value for money.
In bad economic times, public expenditure will tend to rise because of the costs of recession. In good economic times, it may also rise, but perhaps not so fast, because of rising public expectations. The difference is that in the latter case an advanced country with a sensible Government should be able to afford it. Indeed, the figures produced by Lord Kaldor and Terry Ward in The Times recently back that up. Whether the times are good or bad, the top priority must be to ensure that we get the best possible value from the large totals that are spent.
8.56 pm
Mr. Peter Pike: I am grateful for the opportunity to speak about the public expenditure White Paper because this debate is as important as the debate on the Budget in a few weeks' time. Often people overestimate the importance of the Budget debate and downgrade this debate.
In my constituency there will be grave anxiety that the proposals in the White Paper do nothing to deal with the unemployment problem and, indeed, will add to unemployment. That was clearly pointed out by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) in his opening remarks. There will be no reduction in unemployment. In my constituency it was announced today that a further 200 people are to be made redundant at Lucas Aerospace, and obviously I am worried about that.
I was surprised when the hon. Member for Horsharn (Mr. Hordern) suggested that we should privatise public enterprises. That does nothing to help our country's problems, because, when the Government receive the money, they squander it on keeping people unemployed instead of providing work for them.
The hon. Gentleman referred to the water authorities. The North-West water authority faces some of the biggest problems of any water authority. Most of the waterworks are extremely old and need new mains and additional supplies. Most of the sewers were constructed before the turn of the century. In the city centre of Manchester one never knows in which direction one can travel because of the diversions caused by the collapse of the sewer system. Near the Mersey estuary every town until recently has been pumping sewerage into the river Mersey. That is a disgrace. Only recently the first treatment works were opened on that stretch of the Mersey. In the not too distant future there will also be sewage treatment for Liverpool. Work of that type must be tackled. When we speak of water authorities, we speak not only of water supply but of other aspects of the water industry which people tend

735
to ignore. Many people often forget that the water industry also includes sewage. Although there may have been votes in water, there were never any votes in spending money on sewerage, yet that important problem must also be tackled.
Only last Wednesday, we debated the Government's decision in respect of local authority capital receipts and public expenditure. In my constituency, there are still council houses with bathrooms outside the back of the house. Yet, even in 1985, the council is unable to modernise them and provide people with the facilities that they need. More money is necessary if such work is to be undertaken. It is nonsense to limit capital receipts so that only 20 per cent. can be used for housing.
The Government claim to be the friends of the private sector. There was a housing grants bonanza before the general election, but the position has now changed and people are unable to obtain grants to improve or modernise their homes. In my constituency, many pre-1914 houses, and others built in the last century, are in urgent need of modernisation. These are good, stone-built terraced houses which lack basic amenities. Many of them have waste water toilets which depend on the tippler system, whereby waste water is discharged through the sink. People living in such conditions must be given grants to improve their homes.
My constituency has a town hall and many offices which, if in the private sector, would be condemned. In 1981, the council planned to build a town hall extension in an attempt to save money and to avoid rate penalties and the difficulties associated with curbs on revenue expenditure. Now that revenue restraint is so tight—with penalties, ratecapping, and so on — there is no justification for placing further restraints on capital spending which local authorities must take into account when considering revenue. Money should be spent on such things.
In many of our towns, street lighting has deteriorated and is no longer maintained. Many of our roads are potholed and pavements are no longer maintained to the same standard as before. Many parks no longer have flowerbeds, simply because councils do not have the money. Such amenities should be provided.
It is nonsense that in 1985 there should still be Health Service waiting lists. We should be developing the Health Service to allow for early diagnosis so that patients can be cured, but all too often an illness is discovered long after treatment is effective. That might cost money initially, but in the long run there would be a saving. Even if there were not, it would still be right because it would save pain and suffering.
There is also a need for residential accommodation for the elderly. The only growth area at present is the building of private residential homes which ordinary people cannot afford but must depend on simply because councils do not have sufficient resources to build such dwellings. Ironically, the private sector is supported by the DHSS, in that benefits are given to ordinary people who have to live in such dwellings. Consequently, that makes a profit for the private sector. We must provide residential homes for the elderly and sheltered homes for those who need them. Much more money should be spent on such projects. If the Government began putting money into such schemes, we would begin to get people back to work.
736
Most of my constituents believe that the reviews now being carried out by the Secretary of State for Social Services are designed to cut benefits rather than to improve efficiency. I was amazed to hear the suggestion that the earnings-related pension scheme should be brought to an end. Why should ordinary people be unable to maintain a decent standard of living once they retire? Why should they not have proper protection from the social and welfare state? Why should there be a death benefit of only £30? That is now irrelevant and should be brought up to date. Why should the Christmas bonus amount to only £10? That sum should be more realistic.
The Government's means of solving unemployment is to ask people to take lower wages. We hear that time and again from Conservative Members. Such an attitude makes me weary, because millions of people do not get the average wage, but must cope on below average wages. Even the average wage is very much inflated by shift and premium payments for working unsocial hours — for going to work, for example, at 10 o'clock on a Saturday or Sunday night as I had to do before I was elected a Member of Parliament. It is no solution to ask people to accept low wages. I do not oppose the family income supplement, but I believe that it is a subsidy to those who pay low wages. We should look very carefully at this question and ensure that everybody is provided with decent wages and living standards while they are at work, and also when they retire.
9.5 pm
Mr. Tim Yeo: If the House will forgive me, I shall not follow the hon. Member for Burnley (Mr. Pike) on his depressing tour of local problems. All I would say to the hon. Gentleman is that the deprived groups of people to whom he referred have enjoyed in the last six years the enormous benefit of a lower rate of inflation. May I also congratulate my hon. Friend the Member for Enfield, Southgate (Mr. Portillo) on the fluency and excellence of his maiden speech.
This debate has raised a number of issues about the presentation of the White Paper. If next year my right hon. Friend could include, alongside the column which shows the estimated outturn for the current year, in this case 1984–85, the planning total for 1984–85 that was contained in the previous year's White Paper, it would be the best means of checking the controls between one year and another and would mean that we should not need to have before us both White Papers.
I join my hon. Friend the Member for Lewisham, West (Mr. Maples) in his concern about unemployment. Every decision that we make about public expenditure must, first and foremost, be related to unemployment. A reduction in the level of unemployment must now rank alongside the defence of the realm and the preservation of law and order as one of the primary responsibilities of Government. If the Government were to affirm that as their priority, it would enable other subsidiary aims—I stress subsidiary aims—such as the reduction of inflation and the control of spending to be seen as a means to an end, the end being lower unemployment.
It might be possible, as the Opposition have suggested this evening on several occasions, to solve the unemployment problem by a massive dose of public spending. The Opposition have been very careful not to say how much they want to spend. They just want to spend a huge amount of money. At a cost of perhaps £25 billion

737
or £30 billion many new jobs could no doubt be created, but we cannot afford to spend such a sum. Additional public expenditure on that scale would involve a huge increase in interest rates which, in real terms, are already dangerously high. A prolonged period of real interest rates in almost double figures would have an old-fashioned, deflationary impact on the economy which would eventually destroy jobs in the private sector.
Another reason why we cannot afford a huge increase in public expenditure is the cost of servicing the debt. As my right hon. Friend the Member for Worthing (Mr. Higgins) has already pointed out, debt interest is already rising more quickly than any other component of public expenditure. It has risen by 148 per cent. since 1979–80—from £3·5 billion to £8·5 billion. In the three years covered by the White Paper it is projected to rise faster than the spending of any single Government Department. This is a measure of the way in which debt interest is becoming a great burden on the British economy. The cost of servicing our debt now amounts to 6 per cent. of all Government receipts, as opposed to only 4 per cent. five years ago. It would be a reckless act to embark upon a spending programme of the size described by the Opposition which would impose a permanent and heavy burden of interest payments on future generations.
Having made that general point, I hope that the Government will not ignore what could be very favourable effects of showing some flexibility over the question of their spending total. An extra £1 billion, or even £2 billion, as was suggested earlier, would not have disastrous consequences for interest rates or for the total level of debt. Although it would not by itself solve the unemployment problem, it would be a welcome sign of the Government's determination to tackle this problem. Those who have jobs in relatively prosperous areas like my constituency of south Suffolk are just as anxious to see such a sign from the Government as those who are out of work. Indeed, it is my conviction that the concern of the privileged employed for the unemployed is now growing to such an extent that most of them would be willing to see further income tax cuts postponed if the revenues could be used to generate jobs. Extra expenditure on successful schemes such as the enterprise allowance scheme would be widely supported.
Let me touch briefly on some of the specific suggestions for expenditure savings. First, I support the reference made by my hon. Friend the Member for Bridlington (Mr. Townend) to EEC expenditure. Even after the stout effort made by my right hon. Friend the Prime Minister, our expenditure is still running at £1 billion a year. Reference was also made, rightly, to Trident whose military usefulness is already being called into question and whose cost is well beyond what the country can afford. The cancellation of that project and the reduction in spending on the EEC would have no unfavourable employment implications.
With the social security reviews that are coming up the question of the state earnings related pension scheme arises. The country cannot afford the long-term cost of that and the sooner we face up to that the better. However, in that context I hope that we shall protect child benefit. If in the Budget we choose to raise tax thresholds—I hope that we do not because a far more effective form of relief for the economy would be through raising the lower earnings limit for employees' national insurance
738
contributions — let us not make the mistake that we made last year of failing to raise child benefit in line with the increase in thresholds.
There is one area of public expenditure in which I cannot advocate cuts; indeed, I must oppose the reductions already being put forward by the Government. It is deplorable that we should be reducing expenditure in the highly labour-intensive area of local authority housing. In doing so, we are penalising particularly severely just those local authorities that have been most successful in carrying out the Government's policies.
I hope that my hon. Friend the Minister of State will be able to refer to some of those points with others that have been raised earlier in the debate. If we concentrate our efforts on the reduction of unemployment we shay see that success brings its own rewards. As has been pointed out this evening, the cost of benefits paid to the unemployed over the past five years has risen from £1·5 billion to £6·5 billion, quite apart from the additional cost of lost revenue. I commend those points to my hon. Friend.
9.12 pm
Mr. Roger Freeman: In the brief time available I want to make one simple point. I want to concentrate specifically on public sector capital expenditure. In 1981, the National Economic Development Council considered, with representatives of the Treasury, the tests which would have to be met for the introduction of private sector capital into public sector projects.
In 1981 the Treasury representatives set out two tests which have been draconian in their effect. I can think of no example of private sector capital coming into public sector projects since 1981. The two tests were, first, that the private investor should not get an unfair advantage of state guarantee, implicit or explicit, in a public sector project, and, secondly, that the higher costs of the private capital should be paid by higher returns from the particular project. As I have said, there are no examples of private sector capital coming into building roads, pumping stations, railways projects and so on.
Economic conditions have changed and in 1985 that working party should be reconvened. This time, may we have some accountants on the body? Take, for example, the water industry, where, as a result of the negative EFLs being reduced substantially this year, the financing ratio of the industry has been cut from 40 per cent. to some 26 per cent. If private capital came into the water industry to the extent of £100 million, water charges would not have had to have gone up by 11 or 12 per cent. By my calculations, they would have gone up by 4 or 5 per cent. Private sector capital, achieving the same borrowing ratio as has existed in the past year—which, therefore, has presumably been acceptable as prudent financial management—could come into the water industry if the tests established in 1981 were revised.
I urge the Government to consider reconvening the working party, so that it may examine whether the tests can be changed. Private sector capital could then come into public sector projects and, at the margin, enable projects that might otherwise be postponed to go ahead.
9.15 pm
Mr. Terry Davis: The Chief Secretary to the Treasury said that this was the second time that he had opened a debate on a public

739
expenditure White Paper. This is the second time that I have wound up such a debate and on both occasions I have had the pleasant task of commenting on a maiden speech.
I am sure that the hon. Member for Enfield, Southgate (Mr. Portillo) will understand when I say that my pleasure is tinged, as I am sure his is, with deep sadness because of the circumstances that caused the by-election in his constituency. The Opposition and I associate ourselves with everything that the hon. Gentleman said about Sir Anthony Berry. I knew Sir Anthony only slightly, but he was a very nice man and I am sure that the hon. Member for Enfield, Southgate will be a worthy successor to him. The hon. Gentleman made an interesting speech and, after the tour of his constituency, he made a telling point. I shall return to it in a moment.
There were some other interesting speeches from Conservative Members. The debate has shown that, contrary to the conventional wisdom, the Labour party is united, in urging an increase in public expenditure, and the Conservative party is increasingly split. From one wing of the Conservative party, represented by, for example, the hon. Member for Lewisham, West (Mr. Maples), we had pleas for increases in public expenditure. From the other wing, we had the usual ritual calls for cuts in public expenditure from hon. Members such as the hon. Member for Bridlington (Mr. Townend), who made his usual speech. He always calls for cuts in social security benefits, and today he added a call for cuts in housing benefit. He does not seem to be aware that housing benefit has already been cut for many people as a result of changes made by the Secretary of State for Social Services in increasing the assumed scale margin. However, the hon. Member for Bridlington is not easily satisfied and he wants to cut public expenditure even more.
I must draw particular attention to what I can only describe as a notably brave speech by the hon. Member for Stratford-on-Avon (Mr. Howarth), who called not only for the withdrawal of all subsidies to agriculture—I am sure that the farmers of Warwickshire will be interested to read that—but for an end to subsidies to the arts. That was an especially brave call from an hon. Member representing Stratford-on-Avon. I understand that the subsidy to the Royal Shakespeare Company this year is £4·9 million and I am sure that the citizens of Stratford-on-Avon will be pleased to know that their hon. Member has called for an end to that subsidy. The Opposition hope that the Government will turn a deaf ear to his pleas. This is already the first Government under which theatres have closed.
I was impressed by the speech of the hon. Member for Southgate. He respects the sincerity of Opposition Members who urge increases in public expenditure as a way of reducing unemployment. We respect his sincerity in taking the opposite view, although we do not agree with him. Indeed, the hon. Gentleman put his finger squarely on one of the three reasons for the Labour party's opposition to the White Paper. We oppose it because it is based on a misunderstanding of the connection between public expenditure and the economy. This Conservative Government regard public expenditure as a burden on the economy. As the hon. Member for Southgate explained, they regard an increase in public expenditure as leading to fewer jobs whereas we regard such an increase as something that will create jobs. We believe that an
740
increase in public expenditure will create jobs directly because it will involve increased capital investment and increased employment opportunities in the social services. It will also involve the creation of jobs indirectly, as my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) explained, and we believe that an increase in public expenditure will also lead to an expansion of the economy, which will in turn lead to even more jobs. In brief, the Government see public expenditure as a brake on the economy, while the Labour party sees it as the accelerator.
That is why we reject the White Paper's approach, with its emphasis at the beginning on public expenditure being held constant in real terms and amounting to a falling proportion of the nation's income. In our opinion, that is the wrong approach.
Against that background, we also oppose the White Paper because the Government have got the wrong amount for public expenditure. It is interesting that, although the Chancellor of the Exchequer begins his White Paper with the statement that public expenditure is
"being held constant in real terms",
he harks back to 1983–84. He does not compare next year with this year but goes back a year and compares 1985–86 with 1983–84. I suggest that he makes that comparison in order to distract attention from the fact that what he is proposing next year is a cut in real terms in what has been spent this year. That is what the Government are really planning.
Before we look at the truth behind the figures, let us first follow the Chancellor a little further into his White Paper. Having claimed that the Government's aim is for public expenditure to remain static in real terms, he devotes a whole page to showing us that public expenditure is static in cash terms. Having established a so-called planning figure of £132 billion in cash terms for 1985–86—a figure that he established two years ago—he now regards himself as committed to that figure. It does not matter what has changed in the last two years or what has happened to inflation, unemployment, interest rates, or to the pound. The right hon. Gentleman regards inflexibility as a virtue. To prove his inflexibility and to advertise it to the nation, he devotes a whole page to the subject in his White Paper.
Almost a whole page is given over to a bar chart—chart 1.1—which is intended to show that if one draws a bar 8.2 cm long and one then draws another bar 8.2 cm long, they look the same, and that if one then draws another bar that is 8.3 cm long, it looks almost the same. A whole page is devoted to that picture for the less intelligent supporters of the Government's policies.
But the real effect of that rigidity is shown in table 1.7. If we look at what the Government are really doing by comparing what will be spent next year with what has been spent this year, and if we adjust for the effect of inflation, we can see that public expenditure is not being kept stable but is being reduced by £1·6 billion. That is a reduction of 1·3 per cent.
We also oppose the White Paper because we see public expenditure as representing public services. Most items of Government expenditure are rightly termed social services. If the Chancellor of the Exchequer would pay some attention, I would tell him that that point was made time and again by my hon. Friends. An analysis of what makes up those real totals of £120·7 billion for public expenditure next year compared with £122·3 billion spent

741
this year, shows that the biggest reduction is in industry, energy, trade and employment. Yet that is at a time when unemployment is rising.
I concede that the figures are distorted by the inclusion of the effect of negative external financial limits. The Chief Secretary tried, in the most unconvincing part of his speech, to explain that away but he cannot escape the fact that prices for gas and electricity will rise next year by more than they would otherwise have risen if the Government had not changed the EFLs. A tax on gas and electricity is coming.
Mr. John Townend: The main cause of the big difference between this year and next year is the cost of the miners' strike. As the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said, the cost will run into billions of pounds.
Mr. Davis: I do not agree that that is the reason for the difference, and I shall explain how the big difference is caused. In addition to the tax on gas and electricity as a result of negative external financing limits an effect will be caused by the changes in corporation tax announced in last year's Budget. They are not shown in the White Paper.
The most significant reduction in the White Paper, which has nothing to do with the miners' strike, is the reduction of £900 million in real terms in public expenditure on housing. That is a reduction, in one year, of 30 per cent. in the Government's spending on housing. That has nothing to do with miners, but it has everything to do with Ministers.
That is happening when there is growing evidence of the need for more to be spent on the repairs and renovations of local authority housing. That evidence is supported today by the document published by the Association of Metropolitan Authorities which says that £19 billion is needed to modernise and renovate council housing and to repair serious defects in non-traditional, industrialised and system-built dwellings. At such a time, to suggest that the amount spent on housing should be reduced by 30 per cent. is nothing less than criminal.
Not only people who rent council accommodation will suffer as a result of the White Paper. The Government are also hitting owner-occupiers by cutting £900 million from expenditure. A large part of housing expenditure is on improvement grants. The hon. Member for Horsham (Mr. Hordern) intervened in the speech by my right hon. Friend the Member for Sparkbrook to draw attention to the number of improvement grants allocated last year. I accept that in 1983–84 about 250,000 improvement grants were made. The hon. Member contrasted that with the 70,000 improvement grants made in 1979–80.
If the hon. Gentleman had read a little further in the White Paper he would have seen a straightforward statement—perhaps "confession" would be a better word—that expenditure next year is expected to fall to the levels
"which prevailed before the recent urge of grant-aided activity".
That means that the Government intend to reduce the amount available for improvement grants, and the number of improvement grants, to the levels that they were before the increase. The Government intend to move back to the levels that existed before 1982–83, back to the levels before the 1982 Budget, back to where they were three years after the 1979 general election and one year before
742
the 1983 general election. That is the nub. Improvement grants have served their purpose—not for housing, but for the Conservative party's electoral purposes.
This Conservative Government claim to care about home ownership. The truth is that they do not care about home owners. They care even less—
Mr. Marlow: Rubbish.
Mr. Davis: The facts are there in the White Paper for which the hon. Member for Northampton, North (Mr. Marlow) will vote tonight. The hon. Gentleman has not been present for much of the debate.
Sir William Clark: The hon. Member for Birmingham, Hodge Hill (Mr. Davis) says that the Conservative Government do not care about home owners, but many council homes are being sold to sitting tenants and the Labour party opposes that.
Mr. Davis: The hon. Gentleman makes my point. The Government care about home ownership and are anxious to encourage tenants to buy their properties. Once they have bought them, the Government wash their hands of those people. My hon. Friends and I are constantly having former council tenants coming to our advice bureaux asking for help to get them the improvement grants that they were led to believe, before the general election, that they would receive under Conservative rule.
The Government care even less about those who need accommodation, rented or owner-occupied. Last year there were only 38,000 starts in the public sector, fewer than in the year before and only 37 per cent. of the figure for 1978.
A year ago the Chief Secretary urged us to look at the figure for new starts in the private sector. He did not refer us to that figure this year. I was not surprised, because that figure has gone down in the last 12 months. The number of new starts in the private sector is not only lower than the year before but is lower than it was in 1978, the last year of Labour rule, yet we have in power a Government who are supposed to care about home owners.
The British people are not concerned with any doctrinal distinction between public and private sector starts. They are interested in the total number of new starts, public and private together. Last year, the total number of new starts went down, as it had gone down the year before, and there were only 190,000 new starts compared with 265,000 in 1978.
This year, says the Chief Secretary, let us consider not starts but completions, in particular in the private sector. Completions in that sector in 1984, he says, were the highest for 10 years. I must tell the right hon. and learned Gentleman, as I told him last year, that I would respect him more if he was more fastidious in his use of statistics.
The number of completions in the private sector last year was only 1,000 more than in 1978. Completions in the public sector were 83,000 fewer than in 1978. Thus, the right hon. and learned Gentleman must know that last year, 82,000 fewer dwellings were completed than were completed in 1978, a reduction of 30 per cent. Those are the facts that matter to those who need somewhere to live.
In his closing remarks the Chief Secretary criticised on several grounds the Opposition amendment, but unfortunately he did so with less than his usual careful enunciation. Unusually for him, he gabbled through that part of his speech at such a speed that I could not make

743
notes quickly enough. I apologise to the right hon. and learned Gentleman if I am unable, therefore, to reply to all his strictures, but I will deal with those points that I managed to note.
He quibbled with our reference to worsening unemployment. He said that employment had risen by 500,000 during the 18 months to September 1984. I am not sure of the source of the right hon. and learned Gentleman's figure, and he may wish to write to me about that after the debate. More important, he may wish to confirm whether his figure of 500,000 new jobs included 450,000 imaginary jobs.
In June 1983 or thereabouts someone, I am not sure who, decided to take the figures of people in employment and add 58,000 each quarter for employees—58,000 assumed or imaginary jobs—and another 18,000 jobs each quarter for the self-employed who were supposed to have got new jobs, giving a total of 76,000—assumed or imaginary jobs—each quarter. The Chancellor of the Exchequer does not like it, but it is the truth. There was not a once-and-for-all adjustment of 76,000 because 76,000 were added every quarter for 18 months. I suspect that when we learn the source of the Chief Secretary's figures we shall find that he has included, as the Government usually do, at least 450,000, perhaps more, imaginary jobs in his figure of 500,000 new jobs.
Secondly, the Chief Secretary boasted that GDP is at its highest level ever. It would be, of course. It would be surprising if GDP were not at its highest level ever because of the level of inflation last year and the year before that. When we adjust the latest available figures for inflation, we find that GDP in 1983 was only £2·6 billion higher than in 1978. When we remove oil and gas from the calculations—I know that the Chief Secretary likes the finesse of figures presented in this way—we find that GDP was £4 billion less than during the last year of the Labour Government.
It is our case that the Government's policy on public expenditure is wrong. It is wrong in terms of economics, and it is wrong in social terms. They have it wrong in total and wrong in detail as well. The Government's economic policy is wrong throughout, and that is why the Labour Opposition will vote against it this evening.
9.37 pm
The Minister of State, Treasury (Mr. Barney Hayhoe): We have had a wide-ranging debate upon the White Paper with many interesting and effective speeches, but none more so than the maiden speech of my hon. Friend the Member for Enfield, Southgate (Mr. Portillo). I think the whole House welcomed the gracious and proper tribute that he paid to his predecessor, Sir Anthony Berry. We all reflected again during his speech on the tragic events that led to the by-election which resulted in my hon. Friend being here. I think that he blended insight, knowledge, wit and judgment and combined a felicity of phrase with brevity which left the House eager to hear from him again. He made comments about the difficulties of Government forecasting which were rather more perceptive than those made immediately before his by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). My hon. Friend's comments about the autumn statement and the speculation that it has generated—the way in which the media and other commentators have
744
made use of the figures contained within it—deserve careful consideration. My hon. Friend's remarks have been reflected in the comments of others during the debate.
Few, if any, of those who follow these financial and economic debates are entirely happy with the present arrangements. The public expenditure White Paper debate comes close to the Budget and this leads to difficulties. My right hon. Friend the Member for Worthing (Mr. Higgins) referred to the difficulties. The Treasury and Civil Service Select Committee has suggested that June might be an appropriate time for the debate in seeking to influence the annual public expenditure survey that is then getting under way. I understand the concern about having the debate at this time of year, when inevitably it is overshadowed by expectations and keen anticipation of the Budget of my right hon. Friend the Chancellor of the Exchequer in a few weeks' time.
I know that others welcome the opportunity to discuss the Government's plans with the benefit of the report of the Treasury and Civil Service Select Committee as soon as possible after they are published. Given the pressure that the right hon. Member for Sparkbrook applied to obtain the debate, I think that he would fall into that category. It is not an easy dilemma to resolve, but I think that we should give further thought to the timing of the debate, and perhaps discussions through the usual channels could find a satisfactory solution.
Many Budget suggestions have been made during the debate. Much advice has been given to my right hon. Friend the Chancellor of the Exchequer, some of it helpful from my right hon. and hon. Friends and some of it less helpful from elsewhere. I must give the traditional reply to all and say that I cannot seek to anticipate my right hon. Friend's Budget statement.
Having said that, I turn my attention to the report of the Treasury and Civil Service Select Committee and to the references made to it by my hon. Friend the Member for Worthing, the Chairman of the Select Committee. The right hon. Member for Sparkbrook also referred to points made in the report.
My right hon. Friend the Member for Worthing referred to the argument about whether the figures should be given in cost or cash terms. The argument is fairly well worn. My right hon. Friend argued that if the rate of inflation was less than expected, the cash limits should be cut. However, I am fairly sure that he would not argue that if inflation was higher than expected, the cash limits should be increased. The Government have set their course upon the use of cash limits, and I believe that an attempt to change to cost terms would undermine the system. The Government are not convinced by the Select Committee's arguments on that point.
My right hon. Friend also referred to the treatment of debt interest. Many other hon. Members also commented on that point, including the hon. Member for Stockton, South (Mr. Wrigglesworth). The Select Committee suggests that debt interest should be included within the public expenditure planning total. I quite understand why the Select Committee takes that view, but I hope that the Committee, for its part, will understand why the Government have taken a contrary view. The issue, in essence, is: what arrangemens will best serve the interests of the control of public expenditure? The Government's view is that control is better secured with debt interest outside rather than inside the planning total.

745
No great issue of principle is at stake. Debt interest is not in any way neglected in the Government's statistics or in their planning procedures. It is included within the wider definition of public expenditure — general Government expenditure — that appears in numerous prominent official statistics. Public expenditure, so defined, is a key concept in the medium term financial strategy which is reviewed each year in the Budget.
Mr. Higgins: My hon. Friend has not explained why discipline is better enforced by excluding interest from the planning total.
Mr. Hayhoe: My right hon. Friend should refer again to the comments made in the Treasury's replies to the Select Committee.
No great issue of principle is involved. Either procedure could be adopted, but my right hon. Friend the Chancellor has decided that, on balance, it is better to exclude debt interest and to follow the practice of the past. There is not much virtue in going round and round the course.
The question of asset sales has been referred to. The argument about negative expenditure has been rehearsed before. I wish to refer now to the question of local authority capital spending in the context of council house sales. Local authority capital expenditure figures are an integral part of the overall expenditure plans set out in the White Paper. The new controls to be debated next week are designed not to impose cuts but merely to prevent further capital overspends. Uncontrolled capital spending by local authorities could not fail to have a major impact on my right hon. Friend's budgetary policy.
This has been a wide-ranging debate and I should like to consider manpower, for which I have special responsibility. My hon. Friend the Member for Croydon, South (Sir W. Clark) asked about the index-linked element of index-linked bonds allowed for in the accounts. He will find that the figures for debt interest on a national accounts basis are given in paragraph 26 on page 21 of the White Paper.
Sir William Clark: If, for some unknown reason, the net interest payment of £9 billion is not included in the 132 billion of total public expenditure, is the index-linked amount included?
Mr. Hayhoe: The figures in paragraph 26 include the revaluation of principal in line with the retail price index as well as normal interest and bonuses. The RPI assumptions are consistent with those used for social security upratings. If my hon. Friend is dissatisfied after examining those figures, perhaps he will write to me.
The Select Committee recommended the inclusion of a composite table in future White Papers showing manpower figures for past and future years. As my right hon. and learned Friend the Chief Secretary told the Committee, we shall certainly do our best to improve the White Paper's presentation in this respect next year. We should be able to meet the Committee's wishes and provide figures for earlier years, but the inclusion of planning figures for future years, other than for the Civil Service, may prove impractical. For example, targets are set for manpower for each regional health authority in England, but otherwise the Government do not directly control NHS manpower. Nor do they control local authority or nationalised industry manpower. There are
746
therefore considerable difficulties in providing figures for future years on a common and comparable basis with those for the Civil Service.
Mr. Ralph Howell: How has it been possible to make a judgment on the funding of education when there are 590,000 so-called "others" in education in England who are not mentioned in the White Paper? Throughout the United Kingdom, it is likely that 700,000 people are not mentioned in the White Paper. If so, how can a judgment be made?
Mr. Hayhoe: Off the cuff, I cannot answer my hon, Friend, but I shall certainly look into the matter and write to him.
When the Government came to office, we pledged to reduce bureaucracy and administration wherever possible. We have made significant progress in reducing the number of civil servants. The figures have now been brought crown below the targets that we set immediately after the 1979 general election. The result is that we are now saving £750 million net on the pay bill. The reductions have been achieved by improving efficiency, dropping or materially curtailing functions and by privatisation and contracting out. It has for some years been our policy to contract work out of the public service when it is commensurate with sound management and provides good value for money for the taxpayer. That makes a valuable contribution to reducing public expenditure and the better use of resources. Much has already been done and substantial savings have been made. For example, virtually all cleaning and laundry in the Ministry of Defence is contracted out.
The Government believe that more can be done in the NHS, in local authorities and in Government Departments. My right hon. Friend the Secretary of State for the Environment plans to introduce legislation along the lines of the recent consultative paper which will require local authorities to extend the successful competitive tendering regime for building work to a range of other services—school meals, cleaning of buildings, and so on. My right hon. Friend the Secretary of State for Social Services is actively pursuing with health authorities the possibilities for increased competitive tendering.
For Government Departments we are proceeding in two ways. First, Departments will continue to ensure that as much departmental work as possible is subject to competition and that they identify every opportunity for competitive tendering across the widest range of departmental activity. The top management systems which Departments have set up will provide a useful means of identifying suitable areas. Secondly, and more specifically, Government Departments will be required to test the market for five specified services: cleaning, laundry, catering, security guarding — subject to appropriate safeguards—and some kinds of maintenance work.
Mr. Campbell-Savours: This is boring.
Mr. Hayhoe: It is important, because the amount of taxpayers' money that is devoted to paying public servants is a significant part of our overall public expenditure. It is perfectly right and proper that we should be seeking to obtain the best value for the taxpayers' money.
I turn to more controversial matters. The right hon. Member for Sparkbrook talked about the spending linked with the coal strike and compared other cuts in public

747
spending. A number of hon. Members asked questions about the contrast between the cost of the miners' strike and tighter controls on public spending. I emphasise that the Government had no wish to see the cost that the coal strike has imposed on all concerned. Others must answer for that cost. We much regret the cost—whether faced by miners and their families or by the public purse. The Government were certainly not prepared to give in to violence and intimidation or to be deflected from pursuing the right policies for long-term viability in the coal industry by accepting the unreasonable and unprecedented demand that pits should be kept open until the last tonne of coal was exhausted, regardless of cost. When challenged, the right hon. Member for Sparkbrook made it absolutely clear that he would have given in to Mr. Scargill's demands. There was no equivocation about what the right hon. Gentleman said. He was prepared to give in to those demands because of the cost involved. That means that the right hon. Gentleman would have betrayed the working miners who kept industry and commerce going.
Mr. Campbell-Savours: Does the Minister accept that if there had been a Labour Government there would not have been a miners' dispute? The hon. Gentleman's point is irrelevant.
Mr. Hayhoe: I am grateful to the hon. Gentleman for confirming immediately the craven behaviour that we would have expected from the Labour Front Bench.
I reiterate the Government's firm commitment and determination to hold public spending at a level that we can afford and that will further the aims of lower inflation and sustained economic growth.
What do the official Opposition offer? The debate has shown once again that
"Labour has lost the economic argument",
that
"People do not believe Labour policies will work"
and that
"Labour has little credibility on policies for dealing with the economy."
They are not just the views of Conservative Members; they are quotations from a Labour party document which was leaked to the New Statesman at the end of last year.
Even Opposition Members now agree with the realism of the conclusion:
"Labour has lost the economic argument."
They know that when they deailed their policies, they generated disbelief among the electorate. In their election manifesto, they set out proposals for increasing public expenditure by approximately £40 billion. When their politics of that pork barrel failed to get them elected, the Leader of the Opposition was punting for a spending increase of £6 billion. By October last year he was down to £2·3 billion—little more than one twentieth of the figure that he and his party had been proposing only six months before.
Today, when the right hon. Member for Sparkbrook was challenged by my right hon. and learned Friend the Chief Secretary, the right hon. Gentleman was surprisingly coy. Despite his customary bluster, he did not wish to reveal how much increase in public expenditure he wanted to see. The only figure that he mentioned was £1·5 billion. I shall give way to the hon. Gentleman.
Mr. Austin Mitchell rose—
Mr. Hayhoe: I should like to give way to the organ grinder, to use an expression the right hon. Gentleman has used before. I should willingly give way to the hon. Gentleman if there is some confusion.
Mr. Austin Mitchell rose—
Mr. Hayhoe: It is clear that that the right hon. Member for Sparkbrook does not know by how much he would like to increase public expenditure.
Mr. Terry Davis: It is plain that the Minister wrote that part of his speech, like the rest of it, before he listened to my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley). When the Minister reads Hansard tomorrow, he will see that my right hon. Friend gave the figures in his speech.
Mr. Hayhoe: When the right hon. Gentlemn was challenged by my right hon. and learned Friend the Chief Secretary, he failed to give the figures. When I challenged him a moment ago, he would not give them. He put up the hon. Member for Birmingham, Hodge Hill (Mr. Davis) to try to bail him out.
The reason is that the right hon. Gentleman knows that increases in public expenditure would tend to be inflationary and higher inflation would mean fewer jobs. When he was restrained by ministerial responsibility, in December 1978, he said:
"in terms of promoting employment opportunities throughout the country … nothing is more important than containing inflation."—[Official Report, 7 February 1978; Vol. 943, c. 1271.]
As the right hon. Gentleman so aptly put it in his manifesto for the party leadership:
"Our vague hopes of achieving growth through Government spending were barely understood and rarely believed"
when they were put to the electorate at the last general election.
The contrast between the economic weakness which Labour party policies would bring and the present resilience of the economy is stark. Who would have believed a year ago that the economy could withstand a 12-month coal strike without power cuts, massive lay-offs and short-time working? Just think what the British economy could have achieved in 1984 without that damaging dispute, supported by so many Opposition Members. Now that it is over, we can look for increased growth in the months ahead, but to ensure future success we must again reject the irrelevant and irresponsible policies of the Labour party. That is why we shall vote against the Opposition amendment tonight.
Question put, That the amendment be made:—
The House divided: Ayes 182, Noes 357.

Division No. 137]

[10 pm

AYES

Adams, Allen (Paisley N)

Bidwell, Sydney

Alton, David

Blair, Anthony

Anderson, Donald

Boothroyd, Miss Betty

Archer, Rt Hon Peter

Boyes, Roland

Ashley, Rt Hon Jack

Bray, Dr Jeremy

Ashton, Joe

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

Atkinson, N. (Tottenham)

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

Bagier, Gordon A. T.

Brown, Ron (E'burgh, Leith)

Barnett, Guy

Buchan, Norman

Beckett, Mrs Margaret

Caborn, Richard

Beith, A. J.

Callaghan, Jim (Heyw'd & M)

Bell, Stuart

Campbell, Ian

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

Campbell-Savours, Dale

Bermingham, Gerald

Canavan, Dennis

749

Carlile, Alexander (Montg'y)

Lloyd, Tony (Stretford)

Carter-Jones, Lewis

Loyden, Edward

Cartwright, John

McCartney, Hugh

Clark, Dr David (S Shields)

McDonald, Dr Oonagh

Clarke, Thomas

McGuire, Michael

Clwyd, Mrs Ann

McKay, Allen (Penistone)

Cocks, Rt Hon M. (Bristol S.)

McKelvey, William

Cohen, Harry

Mackenzie, Rt Hon Gregor

Coleman, Donald

Maclennan, Robert

Concannon, Rt Hon J. D.

McNamara, Kevin

Conlan, Bernard

McTaggart, Robert

Cook, Frank (Stockton North)

Madden, Max

Cook, Robin F. (Livingston)

Marek, Dr John

Corbett, Robin

Marshall, David (Shettleston)

Cowans, Harry

Mason, Rt Hon Roy

Cox, Thomas (Tooting)

Maxton, John

Craigen, J. M.

Maynard, Miss Joan

Crowther, Stan

Meadowcroft, Michael

Dalyell, Tam

Michie, William

Davies, Ronald (Caerphilly)

Millan, Rt Hon Bruce

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

Miller, Dr M. S. (E Kilbride)

Deakins, Eric

Morris, Rt Hon J. (Aberavon)

Dewar, Donald

Oakes, Rt Hon Gordon

Dixon, Donald

O'Brien, William

Dobson, Frank

O'Neill, Martin

Dubs, Alfred

Park, George

Duffy, A. E. P.

Parry, Robert

Dunwoody, Hon Mrs G.

Patchett, Terry

Eadie, Alex

Pavitt, Laurie

Eastham, Ken

Pendry, Tom

Edwards, Bob (W'h'mpt'n SE)

Penhaligon, David

Evans, John (St. Helens N)

Pike, Peter

Ewing, Harry

Prescott, John

Fatchett, Derek

Radice, Giles

Field, Frank (Birkenhead)

Rees, Rt Hon M. (Leeds S)

Fisher, Mark

Richardson, Ms Jo

Foot, Rt Hon Michael

Roberts, Allan (Bootle)

Forrester, John

Roberts, Ernest (Hackney N)

Foster, Derek

Robertson, George

Foulkes, George

Robinson, G. (Coventry NW)

Fraser, J. (Norwood)

Ross, Stephen (Isle of Wight)

Freeson, Rt Hon Reginald

Rowlands, Ted

Freud, Clement

Ryman, John

George, Bruce

Sedgemore, Brian

Gilbert, Rt Hon Dr John

Sheerman, Barry

Godman, Dr Norman

Sheldon, Rt Hon R.

Golding, John

Short, Ms Clare (Ladywood)

Gould, Bryan

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

Gourlay, Harry

Silkin, Rt Hon J.

Hamilton, James (M'well N)

Skinner, Dennis

Hamilton, W. W. (Central Fife)

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

Hancock, Mr. Michael

Soley, Clive

Hardy, Peter

Spearing, Nigel

Harman, Ms Harriet

Steel, Rt Hon David

Harrison, Rt Hon Walter

Stott, Roger

Hart, Rt Hon Dame Judith

Straw, Jack

Hattersley, Rt Hon Roy

Thomas, Dafydd (Merioneth)

Hogg, N. (C'nauld & Kilsyth)

Thomas, Dr R. (Carmarthen)

Holland, Stuart (Vauxhall)

Thompson, J. (Wansbeck)

Home Robertson, John

Tinn, James

Howell, Rt Hon D. (S'heath)

Torney, Tom

Howells, Geraint

Wainwright, R.

Hoyle, Douglas

Wallace, James

Hughes, Dr. Mark (Durham)

Wardell, Gareth (Gower)

Hughes, Robert (Aberdeen N)

Wareing, Robert

Hughes, Simon (Southwark)

Weetch, Ken

John, Brynmor

Welsh, Michael

Jones, Barry (Alyn & Deeside)

White, James

Kennedy, Charles

Wigley, Dafydd

Kilroy-Silk, Robert

Williams, Rt Hon A.

Kinnock, Rt Hon Neil

Wilson, Gordon

Kirkwood, Archy

Winnick, David

Lambie, David

Woodall, Alec

Lamond, James

Wrigglesworth, Ian

Leadbitter, Ted

Young, David (Bolton SE)

Leighton, Ronald

Lewis, Ron (Carlisle)

Tellers for the Ayes:

Lewis, Terence (Worsley)

Mr. Frank Haynes and

Litherland, Robert

Mr. Austin Mitchell.

750

NOES

Adley, Robert

Dorrell, Stephen

Aitken, Jonathan

Douglas-Hamilton, Lord J.

Alexander, Richard

Dover, Den

Alison, Rt Hon Michael

du Cann, Rt Hon Sir Edward

Amery, Rt Hon Julian

Dunn, Robert

Amess, David

Durant, Tony

Ancram, Michael

Dykes, Hugh

Arnold, Tom

Edwards, Rt Hon N. (P'broke)

Ashby, David

Eggar, Tim

Aspinwall, Jack

Emery, Sir Peter

Atkins, Rt Hon Sir H.

Evennett, David

Atkins, Robert (South Ribble)

Eyre, Sir Reginald

Atkinson, David (B'm'th E)

Fallon, Michael

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

Farr, Sir John

Baker, Nicholas (N Dorset)

Favell, Anthony

Banks, Robert (Harrogate)

Fenner, Mrs Peggy

Batiste, Spencer

Finsberg, Sir Geoffrey

Beaumont-Dark, Anthony

Fletcher, Alexander

Beggs, Roy

Fookes, Miss Janet

Bellingham, Henry

Forman, Nigel

Bendall, Vivian

Forsyth, Michael (Stirling)

Bennett, Rt Hon Sir Frederic

Forsythe, Clifford (S Antrim)

Benyon, William

Forth, Eric

Best, Keith

Fowler, Rt Hon Norman

Bevan, David Gilroy

Fox, Marcus

Biffen, Rt Hon John

Franks, Cecil

Biggs-Davison, Sir John

Freeman, Roger

Blackburn, John

Gale, Roger

Blaker, Rt Hon Sir Peter

Galley, Roy

Body, Richard

Gardiner, George (Reigate)

Bonsor, Sir Nicholas

Garel-Jones, Tristan

Bottomley, Peter

Gilmour, Rt Hon Sir Ian

Bottomley, Mrs Virginia

Goodhart, Sir Philip

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

Goodlad, Alastair

Bowden, Gerald (Dulwich)

Gorst, John

Boyson, Dr Rhodes

Gow, Ian

Braine, Rt Hon Sir Bernard

Gower, Sir Raymond

Brandon-Bravo, Martin

Grant, Sir Anthony

Bright, Graham

Greenway, Harry

Brinton, Tim

Gregory, Conal

Brittan, Rt Hon Leon

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

Brown, M. (Brigg & Cl'thpes)

Griffiths, Peter (Portsm'th N)

Browne, John

Grist, Ian

Bruinvels, Peter

Ground, Patrick

Bryan, Sir Paul

Grylls, Michael

Buchanan-Smith, Rt Hon A.

Gummer, John Selwyn

Budgen, Nick

Hamilton, Hon A. (Epsom)

Bulmer, Esmond

Hamilton, Neil (Tatton)

Burt, Alistair

Hampson, Dr Keith

Butcher, John

Hannam, John

Butler, Hon Adam

Hargreaves, Kenneth

Butterfill, John

Harris, David

Carlisle, John (N Luton)

Harvey, Robert

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

Haselhurst, Alan

Carttiss, Michael

Havers, Rt Hon Sir Michael

Cash, William

Hawkins, C. (High Peak)

Chalker, Mrs Lynda

Hawkins, Sir Paul (SW N'folk)

Chapman, Sydney

Hawksley, Warren

Chope, Christopher

Hayes, J.

Churchill, W. S.

Hayhoe, Barney

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

Hayward, Robert

Clark, Dr Michael (Rochford)

Heath, Rt Hon Edward

Clark, Sir W. (Croydon S)

Heathcoat-Amory, David

Clarke, Rt Hon K. (Rushcliffe)

Heddle, John

Clegg, Sir Walter

Henderson, Barry

Cockeram, Eric

Heseltine, Rt Hon Michael

Colvin, Michael

Hickmet, Richard

Conway, Derek

Higgins, Rt Hon Terence L.

Coombs, Simon

Hind, Kenneth

Cope, John

Hirst, Michael

Cormack, Patrick

Hogg, Hon Douglas (Gr'th'm)

Corrie, John

Holland, Sir Philip (Gedling)

Couchman, James

Holt, Richard

Cranborne, Viscount

Hordern, Peter

Critchley, Julian

Howard, Michael

Crouch, David

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

Currie, Mrs Edwina

Howarth, Gerald (Cannock)

Dickens, Geoffrey

Howell, Rt Hon D. (G'ldford)

Dicks, Terry

Howell, Ralph (N Norfolk)

751

Hubbard-Miles, Peter

Moore, John

Hunt, David (Wirral)

Morrison, Hon C. (Devizes)

Hunt, John (Ravensbourne)

Morrison, Hon P. (Chester)

Hunter, Andrew

Moynihan, Hon C.

Irving, Charles

Murphy, Christopher

Jenkin, Rt Hon Patrick

Neale, Gerrard

Jessel, Toby

Needham, Richard

Johnson Smith, Sir Geoffrey

Nelson, Anthony

Jones, Gwilym (Cardiff N)

Neubert, Michael

Jones, Robert (W Herts)

Newton, Tony

Jopling, Rt Hon Michael

Nicholson, J.

Joseph, Rt Hon Sir Keith

Normanton, Tom

Kellett-Bowman, Mrs Elaine

Norris, Steven

Kershaw, Sir Anthony

Onslow, Cranley

King, Roger (B'ham N'field)

Oppenheim, Rt Hon Mrs S.

King, Rt Hon Tom

Osborn, Sir John

Knight, Gregory (Derby N)

Ottaway, Richard

Knight, Mrs Jill (Edgbaston)

Page, Sir John (Harrow W)

Knowles, Michael

Parkinson, Rt Hon Cecil

Knox, David

Parris, Matthew

Lamont, Norman

Patten, J. (Oxf W & Abdgn)

Lang, Ian

Pattie, Geoffrey

Latham, Michael

Pawsey, James

Lawler, Geoffrey

Peacock, Mrs Elizabeth

Lawrence, Ivan

Pollock, Alexander

Lawson, Rt Hon Nigel

Porter, Barry

Lee, John (Pendle)

Portillo, Michael

Leigh, Edward (Gainsbor'gh)

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

Lennox-Boyd, Hon Mark

Powell, William (Corby)

Lester, Jim

Powley, John

Lewis, Sir Kenneth (Stamf'd)

Prentice, Rt Hon Reg

Lightbown, David

Price, Sir David

Lilley, Peter

Proctor, K. Harvey

Lloyd, Ian (Havant)

Pym, Rt Hon Francis

Lloyd, Peter, (Fareham)

Raffan, Keith

Lord, Michael

Raison, Rt Hon Timothy

Lyell, Nicholas

Rathbone, Tim

McCrindle, Robert

Rees, Rt Hon Peter (Dover)

McCusker, Harold

Renton, Tim

Macfarlane, Neil

Rhodes James, Robert

MacGregor, John

Rhys Williams, Sir Brandon

MacKay, Andrew (Berkshire)

Ridsdale, Sir Julian

MacKay, John (Argyll & Bute)

Roberts, Wyn (Conwy)

Maclean, David John

Robinson, Mark (N'port W)

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

Roe, Mrs Marion

McQuarrie, Albert

Ross, Wm. (Londonderry)

Madel, David

Rossi, Sir Hugh

Maginnis, Ken

Rost, Peter

Major, John

Rowe, Andrew

Malins, Humfrey

Rumbold, Mrs Angela

Malone, Gerald

Ryder, Richard

Maples, John

Sackville, Hon Thomas

Marland, Paul

Sainsbury, Hon Timothy

Marlow, Antony

St. John-Stevas, Rt Hon N.

Marshall, Michael (Arundel)

Sayeed, Jonathan

Mates, Michael

Shaw, Giles (Pudsey)

Maude, Hon Francis

Shaw, Sir Michael (Scarb')

Maxwell-Hyslop, Robin

Shelton, William (Streatham)

Mayhew, Sir Patrick

Shepherd, Colin (Hereford)

Mellor, David

Shepherd, Richard (Aldridge)

Merchant, Piers

Shersby, Michael

Meyer, Sir Anthony

Skeet, T. H. H.

Miller, Hal (B'grove)

Smith, Tim (Beaconsfield)

Mills, Iain (Meriden)

Smyth, Rev W. M. (Belfast S)

Mills, Sir Peter (West Devon)

Soames, Hon Nicholas

Miscampbell, Norman

Speed, Keith

Mitchell, David (NW Hants)

Speller, Tony

Moate, Roger

Spence, John

Molyneaux, Rt Hon James

Spencer, Derek

Monro, Sir Hector

Spicer, Jim (W Dorset)

752

Spicer, Michael (S Worcs)

Waddington, David

Stanbrook, Ivor

Wakeham, Rt Hon John

Stanley, John

Waldegrave, Hon William

Steen, Anthony

Walden, George

Stern, Michael

Walker, Cecil (Belfast N)

Stevens, Lewis (Nuneaton)

Walker, Bill (T'side N)

Stevens, Martin (Fulham)

Wall, Sir Patrick

Stewart, Allan (Eastwood)

Waller, Gary

Stewart, Andrew (Sherwood)

Walters, Dennis

Stewart, Ian (N Hertf'dshire)

Ward, John

Stokes, John

Wardle, C. (Bexhill)

Stradling Thomas, J.

Warren, Kenneth

Sumberg, David

Watson, John

Taylor, John (Solihull)

Watts, John

Taylor, Teddy (S'end E)

Wells, Bowen (Hertford)

Tebbit, Rt Hon Norman

Wells, Sir John (Maidstone)

Temple-Morris, Peter

Wheeler, John

Terlezki, Stefan

Whitney, Raymond

Thatcher, Rt Hon Mrs M.

Wiggin, Jerry

Thompson, Donald (Calder V)

Winterton, Mrs Ann

Thompson, Patrick (N'ich N)

Winterton, Nicholas

Thome, Neil (Ilford S)

Wolfson, Mark

Thornton, Malcolm

Wood, Timothy

Thurnham, Peter

Woodcock, Michael

Townend, John (Bridlington)

Yeo, Tim

Townsend, Cyril D. (B'heath)

Young, Sir George (Acton)

Tracey, Richard

Younger, Rt Hon George

Trippier, David

Trotter, Neville

Tellers for the Noes:

Twinn, Dr Ian

Mr. Carol Mather and

Vaughan, Sir Gerard

Mr. Robert Boscawen.

Viggers, Peter

Question accordingly negatived.
Main Question put and agreed to.
Resolved,
That this House takes note of the White Paper on the Government's Expenditure Plans 1985–86 to 1987–88 (Cmnd. 9428).

STATUTORY INSTRUMENTS, &c.

  ROAD TRAFFIC
  Motion made, and Question put forthwith pursuant to Standing Order No. 79 (5) (Standing Committees on Statutory Instruments, &c.).
  That the draft Motor Vehicles (International Circulation) (Amendment) Order 1985, which was laid before this House on 12th February, be approved.—[Mr. Durant.]
  Question agreed to.

SCOTTISH GRAND COMMITTEE
Ordered,
That, in the course of its consideration of the matter of the Government's Public Expenditure Plans to 1987–88, in relation to the Scotland Programme, the Scottish Grand Committee may meet in Edinburgh on Monday 25th March at half-past Ten o' clock.
That during the proceedings on the matter of the Government's Public Expenditure Plans to 1987–88, in relation to the Scotland Programme, notwithstanding the provisions of Standing Order No. 67 (Meetings of standing committees) the Scottish Grand Committee shall have leave, at its sitting in Edinburgh on Monday 25th March, to sit until half-past Three o'clock.—[Mr. Durant.]

War Widows
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Durant.]
10.14 pm
Mr. Geoffrey Dickens: I am delighted to be able to open this Adjournment debate on behalf of the British war widows.
During this debate I wish to bring to the attention of Her Majesty's Government the financial plight of British war widows in general and my constituent, Mrs. Ivy Cairns, in particular.
It can never be denied that we owe an enormous moral debt of honour to all the widows of those who fell in the service of their country in the first and second world wars. Indeed, without their supreme sacrifice, hon. Members of this House would not have had the privilege of serving in a freely elected Parliament. Today's war widows have security and care but not so the widows of the two world wars.
What causes a lady like my constituent, Mrs. Ivy Cairns, to write to Her Majesty the Queen and the Prime Minister returning the war medals of her first husband? It is a very sad story but needs to be told in my effort to help Mrs. Cairns and many other war widows similarly placed. Sadly, Mrs. Cairns lost her first husband, who died fighting for his country in France during the second world war in 1940. Mrs. Cairns was then awarded £1 per week war widow's pension until she remarried a retired police officer in 1945. Upon remarriage Mrs. Cairns was awarded a £50 pay-off gratuity from the War Office who then discharged their responsibility in law in favour of her new husband. Mrs. Cairns has calculated that this has saved the Treasury over £40,000 in war widow's pension.
Sadly, again, Mrs. Cairns was widowed for a second time in 1960 and was not recognised as a police widow because her husband had not been a serving police officer at the time of their marriage. My constituent therefore was not recognised as a "police widow" or as a "war widow", so from 1960 until 1971 she was completely without any kind of widow's pension. In 1971 she was awarded £1·32 per week as an age-related pension.
If Mrs. Cairns' first husband had been an officer, she would not have received the small gratuity but, under a right inherited from the sevice Departments many years ago, she may have had her war widows' pension restored at the discretion of the Secretary of State on the death of her second husband. This is unfair and unjust because many "other rank soldiers" conscripted during wartime came back into industry and commerce to rise to the very top and even sit in the British Cabinet. So prospects for an officer's widow could not be said to be superior.
Mrs. Cairns' soldier husband was only in the Army for a few months so could not earn a commission. He was killed holding the last line against the advancing German army at Dunkirk, killed so that thousands could be saved in the armada of small boats.
Other countries award so many special concessions to their war widows that they are financially secure. They consider that if a women is widowed through her husband's war-time service they owe her a great debt for the remainder of her life. Therefore, if a war widow remarries and is widowed again, she is immediately reinstated so that she can continue to be protected as a war widow.
754
Mrs. Christa Gardiewski of Frankfurt, a German war widow, freely confesses that she is better treated than British war widows.
Italy not only reinstates its war widows on the death of a second husband but upon that remarriage part of a women's war widow's pension continues to be paid to her if she marries a man of low income.
France has superior arrangements to the United Kingdom, and the Australians have an eight-page list of concessions given to their war widows. I could give many more examples.
This country has betrayed British war widows of the two world wars. Because I feel so angry with successive Governments I should today be calling for parity with widows of service men killed in Northern Ireland or in the Falkland Islands Task Force; and so on; improvement of the status of those devoted widows who have nursed badly war-disabled ex-servicemen until bereavement, and stopping the confiscation of the war widows pension during hospitalisation, and so on.
Consideration of those matters cannot be left much longer, because we have 65,000 world war widows who are dying at the rate of 5,000 each year.
However, I shall concentrate on my demand that all war widows who remarry and who are widowed again be immediately reinstated as war widows; in other words, the state shall always accept Mal responsibility for their widowhood. That would help Mrs. Cairns and so many like her who do not feel bitter but just disappointed in their country.
Let me quote from the letter sent from Buckingham Palace at the end of the war to each widow. It said:
"The Queen and I offer you our heartfelt sympathy in your great sorrow. We pray that your country's gratitude for a life so nobly given in its service may bring you some measure of consolation."
I ask my hon. Friend the Under-Secretary of State for Health and Social Security, to dwell on that sentence which talks of "your country's gratitude".
10.22 pm
The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): I am grateful to my hon. Friend the Member for Littleborough and Saddleworth (Mr. Dickens) for initiating this debate about war widows. Indeed, in this year which marks the 40th anniversary of the ending of the second world war, it is particularly appropriate that we should remind ourselves of the debt which we owe to those who lost their husbands in the service of this country. War widows have always been regarded as very special. I entirely endorse the sentiments of my hon. Friend that it is proper that that should be so. Nothing can compensate them for their terrible loss. The special circumstances of their bereavement are, however, recognised in the preferential provisions made for them under the war pensions scheme administered by my Department. There are some 67,000 war widows today, and hon. Members will wish to know just what they receive under that scheme.
First, there is the standard war widow's pension, which is currently £46·55 a week for the widow of a private soldier; other widows also receive additions for their late husband's service rank. My hon. Friend expressed his particular concern about the elderly war widow. I very much share this concern. Elderly war widows are

755
generally recognised to have greater needs and, for that reason, they receive special age allowances in addition to the pensions that I have already mentioned.
The age allowance is currently £5 a week at age 65. It is increased to £10 a week at age 70, and to £12·50 at age 80. Those allowances were significantly improved last November, when the new tier of £12·50 was also introduced for the very elderly—an increase of almost £4 a week. I am very glad that the Government were able to provide this additional help for elderly war widows. It means that a war widow aged 65 or over receives between £51·55 and £59·05 a week at least — this is, up to £23·25 a week more than her national insurance counterpart. Furthermore, as hon. Members will know, one of the first acts of this Government was to free war widows' pensions from income tax.
My hon. Friend has suggested that we are less generous in the provision that we make in this country for our war widows, as compared with other countries. I do not accept that. Such comparisons are not easy to make; one needs to look not only at the rates of pensions and allowances and the cost of living in those countries, but at such things as the conditions of entitlement to pension, whether or not it is taxable and whether or not it is means-tested in any way. Generally speaking, our provisions for war widows compare very favourably with those of other countries. I reject my hon. Friend's assertion that our widows have been betrayed.
In addition to the pensions payable under the war pensions scheme, for the widows of men who served in the armed forces after March 1973 a pension is also provided under the occupational pension scheme for the forces, which is administered by the Ministry of Defence. The changes to the armed forces pension scheme in 1973 represented a substantial improvement in the occupational pension provision for service men and their families. However, as my hon. Friend has pointed out, they inevitably lead to comparisons being drawn with the provision for service men, and their widows, whose seervice ended before that date.
Improvements in occupational pension schemes are not normally made retrospective; and the cost of doing so in this case would have been prohibitive — up to £600 million a year in current terms. That could not be afforded then and it cannot be afforded now. I am sure that hon. Members will agree that it would have been wrong to have refrained from making those major improvements, just because they could not be made retrospective. That would not have been in the best interests of current service men and their families.
I should like to mention a further example of the Government's concern for war widows. Last October my right hon. Friend the Minister of State for the Armed Forces announced that, beginning this year, the Government would be making an annual sum available to the Royal British Legion to assist war widows to visit their husbands' graves overseas. The sum for 1985–86 is £150,000. The Royal British Legion has agreed to assume responsibility for making all the necessary arrangements for these visits, including the handling of applications and the selection of countries and cemeteries to be visited.
756
My hon. Friend raised the particular question of the rules which apply to war widow's pension where a widow re-marries and is subsequently widowed a second time. I should explain to hon. Members that we regard the war widow's pension as a means of providing for her maintenance; it is a case of the state stepping in to take over the responsibility that would have fallen to her late husband. If she subsequently marries again, her new husband assumes responsibility for her support, and war widow's pension ceases — although any allowances in payment to her for the children of her late husband continue to be paid.
On remarriage, a widow whose former husband held a rank other than that of an officer receives a gratuity equivalent to one year's war widow's pension. Should she be so unfortunate as to be widowed a second time she cannot have her war widow's pension reinstated. She would of course, normally be eligible for national insurance widow's pension. Widows of officers do not receive a gratuity when they remarry. Instead, as my hon. Friend has mentioned, there is the facility for them to have their war widow's pension reinstated if their second husbands die. I must stress, however, that this reinstatement of pension is not automatic. It is made only in cases where there is shown to be a financial need. About 120 officers' widows currently receive a reinstated pension. This usually amounts to a topping up of the national insurance widow's pension and any other income to the level of their war widow's pension.
My hon. Friend quoted the particular, very sad, case of Mrs. Cairns. Let me say that I have the greatest sympathy for that lady. She suffered the most grevious loss when her young husband of only a few months was tragically killed during the second world war. When she remarried some five years later she would of course have been aware that she would thereby relinquish her war widow's pension. Subsequently, however, she had the great misfortune to be widowed a second time; and she was unable to receive either a pension from her second husband's employment, because he had already retired when they married, or a national insurance widow's pension because he was over the age of 65 in 1948 when the scheme began. However, even if Mrs. Cairns' first husband had been an officer, the question of re-instatement of her war widow's pension would, as I have explained, have depended upon her being in financial need.
My hon. Friend has described as anomalous the difference in treatment between the widows of officers and those of other ranks in this respect. These particular provisions date back some 60 years, and the reasons for the difference are largely historical. I accept that there may be thought to be little justification for such a distinction today, and I can assure my hon. Friend that I shall certainly reflect further on the points which he has made.
I am grateful to my hon. Friend for having raised this matter and I am glad of this opportunity to assure him and other hon. Members of the Government's continuing commitment to the cause of war widows and the war disabled.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes to Eleven o'clock.

ATTORNEY-GENERAL
  Official Secrets Act
  Official Secrets Act
ENVIRONMENT
  Council House Sales
  Council House Sales
  Empty Dwellings (Greater London)
  Empty Dwellings (Greater London)
  Gipsy Sites
  Gipsy Sites
  Local Authority Services
  Local Authority Services
  Disabled Persons (Building Regulations)
  Disabled Persons (Building Regulations)
  General Needs Housing Association
  General Needs Housing Association
  Pesticides
  Pesticides
  Derelict Land
  Derelict Land
  Local Government Structure
  Local Government Structure
  Lindane
  Lindane
  Housing Associations (London)
  Housing Associations (London)
  Rate Limitation Order
  Rate Limitation Order
  Refuse Services
  Refuse Services
  Local Government Finance
  Local Government Finance
  Olympic Games
  Olympic Games
  Fluoride
  Fluoride
  Hampton Court Palace
  Hampton Court Palace
HOME DEPARTMENT
  Metropolitan Police Unit C11
  Metropolitan Police Unit C11
  Animals (Experiments)
  Animals (Experiments)
  Carr-Gomm Charity
  Carr-Gomm Charity
  Drugs (Licence Fees)
  Drugs (Licence Fees)
  Cornwall (Electoral Districts)
  Cornwall (Electoral Districts)
  Siren Warning (Lancashire)
  Siren Warning (Lancashire)
  Sex Offenders (Treatment)
  Sex Offenders (Treatment)
  Charities
  Charities
TRADE AND INDUSTRY
  Exchange Rate
  Exchange Rate
  Information Technology
  Information Technology
  Alvey Programme
  Alvey Programme
  Companies Act 1980 (Prosecutions)
  Companies Act 1980 (Prosecutions)
  Manufacturing Trade Figures
  Manufacturing Trade Figures
  Inmos
  Inmos
  British Tourist Authority
  British Tourist Authority
  Quality Assurance Campaign
  Quality Assurance Campaign
  Regional Assistance
  Regional Assistance
  COCOM Agreement
  COCOM Agreement
  Multi-fibre Arrangement
  Multi-fibre Arrangement
  EC Research Subsidy (Leather)
  EC Research Subsidy (Leather)
  Pharmaceutical Products
  Pharmaceutical Products
  False and Misleading Price Information (Review)
  False and Misleading Price Information (Review)
ENERGY
  Renewable Energy (Research and Development)
  Renewable Energy (Research and Development)
  Torus Consortium
  Torus Consortium
  Coal (Pithead Price)
  Coal (Pithead Price)
  Plutonium
  Plutonium
  Energy Efficiency
  Energy Efficiency
EMPLOYMENT
  Catering Industry
  Catering Industry
  Labour Statistics
  Labour Statistics
  Construction Industry (Death and Injuries)
  Construction Industry (Death and Injuries)
  Average Wage
  Average Wage
  Unemployment Statistics
  Unemployment Statistics
  Pesticides
  Pesticides
  Wages Councils
  Wages Councils
  Youth Training Scheme
  Youth Training Scheme
  Area Manpower Boards
  Area Manpower Boards
THE ARTS
  National Theatre
  National Theatre
  South Bank Board
  South Bank Board
  Heritage Provision
  Heritage Provision
  Arts Sponsorship
  Arts Sponsorship
  West Midlands Regional Arts Association
  West Midlands Regional Arts Association
  Grant Allocations
  Grant Allocations
FOREIGN AND COMMONWEALTH AFFAIRS
  Korea
  Korea
  Diplomatic Posts
  Diplomatic Posts
  UN Decade for Women
  UN Decade for Women
  North Atlantic Treaty Organisation
  North Atlantic Treaty Organisation
  Falkland Islands
  Falkland Islands
  E1 Salvador
  E1 Salvador
  British Embassy School, Bonn
  British Embassy School, Bonn
TRANSPORT
  Drink-drive Campaign (Cost)
  Drink-drive Campaign (Cost)
  A40
  A40
  Civil Aviation Policy
  Civil Aviation Policy
  Severn Crossing
  Severn Crossing
  Lost Vessels (Inquiries)
  Lost Vessels (Inquiries)
  Motorway Service Areas
  Motorway Service Areas
  Gatwick (Signposting)
  Gatwick (Signposting)
EDUCATION AND SCIENCE
  Soil Survey
  Soil Survey
  Teachers (Pupil Contact Hours)
  Teachers (Pupil Contact Hours)
  Bursaries
  Bursaries
  European Organisation for Nuclear Research
  European Organisation for Nuclear Research
  Science and Engineering Research Council
  Science and Engineering Research Council
  Burnham Committee
  Burnham Committee
  Education Costs
  Education Costs
  Assisted Places Scheme
  Assisted Places Scheme
  Sixth Form and Tertiary Colleges
  Sixth Form and Tertiary Colleges
  Grammar Schools
  Grammar Schools
  School Meals
  School Meals
  Teachers (Pay Dispute)
  Teachers (Pay Dispute)
  Student Grant
  Student Grant
  Pupils (Cost)
  Pupils (Cost)
  Teachers (Pay)
  Teachers (Pay)
NORTHERN IRELAND
  Transport Costs (Study)
  Transport Costs (Study)
  Ice Rink (Castlereagh)
  Ice Rink (Castlereagh)
  Prisoners
  Prisoners
  Terrorists (Trial Costs)
  Terrorists (Trial Costs)
  Wages Council Regulations (Breaches)
  Wages Council Regulations (Breaches)
  Wages Councils
  Wages Councils
  Road Lighting
  Road Lighting
  General Needs Housing Association
  General Needs Housing Association
WALES
  Wrexham Maelor Hospital
  Wrexham Maelor Hospital
  Redundancies
  Redundancies
  IDC Ltd.
  IDC Ltd.
  South Glamorgan (Land Sale)
  South Glamorgan (Land Sale)
  Labour Statistics
  Labour Statistics
  Milk Quotas
  Milk Quotas
  Free School Meals
  Free School Meals
  Teacher-Pupil Ratios
  Teacher-Pupil Ratios
  New Schools
  New Schools
  Boundary Review
  Boundary Review
  Building Land
  Building Land
  Planning Appeals
  Planning Appeals
  General Needs Housing Association
  General Needs Housing Association
  Public Bodies
  Public Bodies
  M4 (Design Life)
  M4 (Design Life)
  Clothing Industry
  Clothing Industry
AGRICULTURE, FISHERIES AND FOOD
  Harvest Intervals
  Harvest Intervals
  Agriculture (Wages and Employment)
  Agriculture (Wages and Employment)
  Agriculture and Food Research Council
  Agriculture and Food Research Council
  Imported Foodstuffs
  Imported Foodstuffs
  Foodstuffs (Exports)
  Foodstuffs (Exports)
  Intervention Stocks
  Intervention Stocks
  European Community Levies
  European Community Levies
  Dairy Output
  Dairy Output
  Waste (Sea Disposal)
  Waste (Sea Disposal)
  Pesticides
  Pesticides
PRIME MINISTER
  European Community (Policy Review)
  European Community (Policy Review)
  EC (Own Resources)
  EC (Own Resources)
  Teachers (School Meals)
  Teachers (School Meals)
  Ministerial Duties
  Ministerial Duties
  VE Day
  VE Day
  Plutonium
  Plutonium
  British National Oil Corporation
  British National Oil Corporation
  Ministry of Defence (Cleaners)
  Ministry of Defence (Cleaners)
  Fluoride
  Fluoride
SCOTLAND
  Drug Rehabilitation Centres
  Drug Rehabilitation Centres
  Private Hospitals
  Private Hospitals
  Manufacturing Industry
  Manufacturing Industry
  North Sea Oil and Gas
  North Sea Oil and Gas
  Immigration and Emigration
  Immigration and Emigration
  Labour Statistics (Glasgow)
  Labour Statistics (Glasgow)
  Training Schemes (Glasgow)
  Training Schemes (Glasgow)
  Skillcentres (Strathclyde)
  Skillcentres (Strathclyde)
  General Needs Housing Association
  General Needs Housing Association
  EC Grants (Edinburgh)
  EC Grants (Edinburgh)
  "Broadleaves in Britain"
  "Broadleaves in Britain"
  Forestry Commission
  Forestry Commission
  Conservation
  Conservation
  Chief Inspector of Prisons (Reports)
  Chief Inspector of Prisons (Reports)
SOCIAL SERVICES
  Social Security (Equality of Treatment)
  Social Security (Equality of Treatment)
  NHS (Managers)
  NHS (Managers)
  Re-establishment Centres
  Re-establishment Centres
  Limited List Prescribing
  Limited List Prescribing
  Private Residential Care Homes
  Private Residential Care Homes
  Junior Doctors (Promotion)
  Junior Doctors (Promotion)
  Blood Donor Sessions
  Blood Donor Sessions
  Doctors (Sleeping Arrangements)
  Doctors (Sleeping Arrangements)
  Hospital Doctors
  Hospital Doctors
  Resettlement Centres
  Resettlement Centres
  Radical Cystectomy Treatment
  Radical Cystectomy Treatment
  Supplementary Benefit
  Supplementary Benefit
  Resettlement and Re-establishment Centres
  Resettlement and Re-establishment Centres
  NHS (Drugs Bill)
  NHS (Drugs Bill)
  "The Health Service in England"
  "The Health Service in England"
  Child Benefit
  Child Benefit
  Pesticides
  Pesticides
  Carr-Gomm Charity
  Carr-Gomm Charity
  State Pension
  State Pension
  Child Benefit
  Child Benefit
  Supplementary Benefit
  Supplementary Benefit
  Children's Nurses
  Children's Nurses
  Public Health Laboratory Service
  Public Health Laboratory Service
  Christmas Bonus
  Christmas Bonus
  Hospital Building
  Hospital Building
  Hospital Closures
  Hospital Closures
  Fluoride
  Fluoride
  Hospital Beds
  Hospital Beds
  Local Authorities (Social Services)
  Local Authorities (Social Services)
  Coal Industry Dispute
  Coal Industry Dispute
  Family Income Supplement
  Family Income Supplement
  Consultants (Appointments)
  Consultants (Appointments)
  Hospital Doctors
  Hospital Doctors
  Hospital and Community Services
  Hospital and Community Services
NATIONAL FINANCE
  Public Works Loan Commissioners
  Public Works Loan Commissioners
  Business Schemes (Tax Relief)
  Business Schemes (Tax Relief)
  Income Tax Relief
  Income Tax Relief
  Extra-statutory Concessions
  Extra-statutory Concessions
  Low Tax Economy
  Low Tax Economy
  European Community (Payments to United Kingdom)
  European Community (Payments to United Kingdom)
  Inland Revenue Staff
  Inland Revenue Staff
  Income Tax and National Insurance
  Income Tax and National Insurance
  Value Added Tax
  Value Added Tax
  Enterprise Allowance Scheme
  Enterprise Allowance Scheme
  Christmas Tips
  Christmas Tips
  Benefits
  Benefits
  Taxation
  Taxation
  Gross Domestic Product
  Gross Domestic Product
  Tax Rates
  Tax Rates
  North Sea Oil and Gas
  North Sea Oil and Gas
  Family Incomes (Taxation)
  Family Incomes (Taxation)
  Business Expansion Scheme
  Business Expansion Scheme
  "Official Report"
  "Official Report"
  Retirement Pension
  Retirement Pension
  Revenue Statistics
  Revenue Statistics
  Per-capita Statistics
  Per-capita Statistics
  Senior Police Officers (Pensions)
  Senior Police Officers (Pensions)
DEFENCE
  Chemical and Biological Weapons
  Chemical and Biological Weapons
  American National Guard
  American National Guard
  Territorial Army (Centres)
  Territorial Army (Centres)
  Military Music School
  Military Music School
  Nuclear Submarines
  Nuclear Submarines
  Royal Ordnance Factory, Euxton
  Royal Ordnance Factory, Euxton
  Operation Yealstead
  Operation Yealstead
  Cruise Missiles
  Cruise Missiles
  Defence Expenditure (Costing Index)
  Defence Expenditure (Costing Index)
  Low-flying Helicopters
  Low-flying Helicopters
  Contract Cleaners
  Contract Cleaners

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

Trident Contracts
Lord Davies of Leek: 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 why only 21 of the 250 suitably qualified British firms were allowed to bid for work on Tridents' ballistic missiles to be supplied by American companies for Britain's 1990 nuclear submarine fleet.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, the situation is not as described by the noble Lord. Up to the end of September 1984, the last period for which we have data, 120 United Kingdom firms had been invited to bid, but only 42 responded. The total number of United Kingdom firms qualified to bid for work on the Trident II weapon system programme has now increased to about 300.
Lord Davies of Leek: My Lords, I am grateful to the noble Lord for that Answer. Nevertheless, there is no doubt that authoritative groups of people think that we have come out of this with a bad deal. Sir Raymond Lygo—
Noble Lords: Question!
Lord Davies of Leek: My Lords, is it not true that Sir Raymond Lego himself said that the work on the Trident has meant that we have come out of it with a bad deal; in other words, that it is not as good as it should be, and that, in order to help the unemployment situation, work should have been given to more firms in this country which are able to carry out the work? That is what I believe. I ask that supplementary question; but I shall stand corrected if I am wrong.
Lord Trefgarne: My Lords, I think that there was some confusion in the minds of some people about the number of contracts which were available and the number which have been awarded. The number of 21, which appears in the Question tabled by the noble Lord, was the number of contracts so far awarded. That related to some months ago, and the number is now 54. I must say that I am disappointed that only 42 firms out of the 120 which have been invited to bid have in fact chosen to do so.
Lord Davies of Leek: My Lords, I am grateful to the noble Lord.
Lord Orr-Ewing: My Lords, can my noble friend say whether it is still true that 55 per cent. of the cost of the
1088
Trident operation, for both the boats and the Trident missiles, will be spent in this country and will therefore provide very valuable jobs? How many jobs, both direct and indirect, will be provided by this programme?
Lord Trefgarne: My Lords, my noble friend is quite right. The answers that I have given relate to the other 45 per cent. which is being acquired from the United States. It is the case that, so far as the Trident programme is concerned, 55 per cent. of the total United Kingdom acquisition will come from United Kingdom sources and at the peak of the programme it will employ some 32,000 people altogether.
Lord Boston of Faversham: My Lords, may we on this Bench say how nice it is to see the noble and learned Lord the Lord Chancellor back among us and restored to health? Is it not the case that, when Trident was first announced. Her Majesty's Government expected that some 70 per cent. of the costs would be spent in this country and only 30 per cent. in the United States? Also, is it not the case that now, as announced last year in the Defence White Paper, it is down to only 55 per cent. in our favour, as has been said this afternoon, and 45 per cent. in the United States favour? Can the noble Lord the Minister say what is being done to redress this imbalance, if this regrettable project is to be continued?
Lord Trefgarne: My Lords, I do not recall the 70 per cent. figure to which the noble Lord refers. If that figure ever existed, it was certainly a long time before I had anything to do with these matters. However, we certainly intend to proceed with the programme. I do not imagine for a moment that the percentage to which I have referred today is likely to change significantly.
Lord Mayhew: My Lords, is the noble Lord able to tell us the value of the bids that have so far been accepted?
Lord Trefgarne: My Lords, at 30th September, which is the last date for which I have figures, 37 contracts had been placed valued at 13.8 million dollars. Since then the award of a further 17 contracts to 15 additional companies has been reported, bringing the total awards to just over 31 million dollars in value.
Lord Boston of Faversham: My Lords, although the Minister may be acquitted as regards those figures and his own involvement, should not the Government have corrected the Financial Times when it published those figures in 1981?
Lord Trefgarne: My Lords, again, that was rather before my time. I should have to see exactly what it was that the Financial Times published before I sought to correct it.
Lord Avebury: My Lords, is the noble Lord able to say what will be the cost over the exchanges in pound terms if one dollar equals £1 over the lifetime of the contracts?
Lord Trefgarne: My Lords, all these questions relating to the parity of the pound and the dollar are purely hypothetical and I hope that the noble Lord will forgive me for not seeking to answer them. Following the seesaws of the past few days and weeks, if anyone can really anticipate what the pound-dollar ratio will be in, say, three or four years' time, he is cleverer than I am.
Lord Ironside: My Lords, will my noble friend say how many of the 42 bidders to which he referred were involved with the high technology classified work and how many were involved with the unclassified work? Will my noble friend not agree that in industry in this country we want to aim to get the maximum amount of the high technology classified contracts?
Lord Trefgarne: My Lords, it would certainly be good to have as much as we can of the high technology work to which my noble friend refers, but we must, I think, be careful not to duplicate high technology facilities in this country which already exist elsewhere because that might render nugatory some of the value of purchasing these systems from the United States.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that it is becoming increasingly apparent to more and more people that Trident is an expensive mistake, and that the Government should change their mind about this before they get themselves involved in a situation in which they cannot escape from a project which is of no value whatsoever and which is a profound waste of money which could be well spent elsewhere?
Lord Trefgarne: My Lords, I am aware that that is the view of the noble Lord, but it is not mine.
Viscount Mersey: My Lords, is it still roughly the case that we are to build the boats and the warheads, and the Americans are to build just the missiles?
Lord Trefgarne: Yes, my Lords, my noble friend is right; we are building the submarines and the warheads and the United States are supplying the missiles and the fire control system.
Lord Paget of Northampton: My Lords, if the real object of this exercise, of which I fully approve, is to spend money in England, would we not be more harmlessly occupied in buying ourselves a "Chunnel"?
Lord Trefgarne: My Lords, the noble Lord is mistaken. The object of this programme is not just to spend money in the United Kingdom, though we are spending a substantial sum of money in the United Kingdom; it is to provide ourselves with an effective deterrent well into the next century.
Lord Mayhew: My Lords, would it not be right to say from the figures that the noble Lord has given that the value of the bids so far accepted is less than 1 per cent. of what is to be the total expenditure in the United States?
Lord Trefgarne: My Lords, yes, the bids to which I have referred today are a comparatively small
1090
proportion of the money being spent in the United States, but then 55 per cent. of the whole project so far as we are concerned is being spent here.

Iraq-Iran War
2.45 p.m.
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 how the EEC, the United Nations and other bodies have responded to their efforts to end the Iraq-Iran war.
Lord Trefgarne: My Lords, the European Community continues to call for an early end to this tragic conflict. We have supported these efforts and those of the United Nations Secretary-General, who has been involved in a number of initiatives. On 9th June 1984, he appealed to both sides to cease attacks on civilian targets. Both sides accepted, and this agreement has largely been adhered to. The Secretary-General has also called on both sides to refrain from using chemical weapons and to cease attacks on shipping in the Gulf. We shall continue to support all realistic initiatives.
Lord Molloy: My Lords, that comprehensive reply is most appreciated. I acknowledge that to a degree both the United Nations and the EEC have endeavoured to follow the British lead. Would the noble Lord agree that the British Foreign Secretary has given a magnificent lead in all matters involving the Middle East, and particularly in this dreadful conflict? He has pointed out the dangers which can afflict the rest of mankind. In so far as he has given the lead, and in so far as Britain has supported both the EEC and the United Nations in its formative ideas, is it not now about time that these two organisations followed up the submissions of the British Foreign Secretary, which have been both realistic and imaginative?
Lord Trefgarne: My Lords, I think that the best way for progress to he achieved in this matter is for the parties to this dispute, the Iranians and Iraqis, to accept some of the offers of mediation which have been made. Most recently, of course, there were the Japanese proposals, which came before the General Assembly in September last year, which we believe to be both balanced and well conceived.
Lord Shinwell: My Lords, as a matter of information, can the noble Lord the Minister inform your Lordships' House what kind of pressure Her Majesty's Government could exercise over Iraq, which is completely under Soviet control in the first instance, and over Iran, which is under her own control and will not allow anybody else to interfere? Why do we not mind our own business occasionally? Have we not got enough on our plates without interfering in matters which, from the standpoint of exercising human rights I fully applaud, but otherwise over which we have no influence whatever?
Lord Trefgarne: My Lords, I think that the noble Lord is right to suggest that our influence in these matters is somewhat limited. Nonetheless, it is an appalling conflict and we should like to do what we can to bring it to an end.
Lord Cledwyn of Penrhos: My Lords, has the noble Lord read the United Nations report on the appalling treatment of prisoners of war on both sides? Can he say what action Her Majesty's Government propose to take about that? Would it not be worth considering putting an embargo on any financial credit we give to either Iraq or Iran? Is the noble Lord in a position to say what use was made by Iraq of the credit of allegedly £575 million given by the Government to that country?
Lord Trefgarne: My Lords, so far as prisoners of war are concerned, it is quite right that a report on that matter has been prepared under the Secretary-General's auspices. I understand that it is being considered by the Security Council this very day, and I hope that some constructive proposals will come out of that. We certainly support action being taken in the Security Council in that regard. We believe that any resolution should concentrate on the report itself, not on the wider issues of the conflict. On the question of trade with both countries, I think that my noble friend Lady Young wrote to the noble Lord on this recently and I do not think that I can add anything to that letter.
Lord Nugent of Guildford: My Lords, with regard to our interest in this long-running and very unpleasant war, do we not also have an interest in maintaining the safety of oil shipping in the Gulf, where we have, certainly with our partners, a substantial interest?
Lord Trefgarne: My Lords, my noble friend is quite right about that. There have been a number of regrettable incidents in the Gulf recently with regard to shipping. Indeed, the safety of shipping was one of the matters addressed by the Japanese proposals which came before the General Assembly recently and to which I referred a moment ago.
Lord Molloy: My Lords, does the noble Lord the Minister agree that the British Government realises the enormous amount of trade and commerce which goes on in the Gulf between our country and the Gulf States, and that if it were shattered, it could cause an increase of almost another 20 per cent. in British unemployment? At the same time the Government have not ignored the human horror and tragedy of the war. Finally, will the noble Lord confirm that the British Foreign Secretary's proposals for cutting out some of the horrendous actions, such as the bombing of cities, have been accepted by Iraq but not by Iran, and that this is the lead that the British are giving—a lead which I hope the noble Lord will urge the EEC, the Americans and the United Nations to follow?
Lord Trefgarne: My Lords, I am grateful to the noble Lord for his appreciative words on British Government policy.
Lord Mayhew: My Lords, is the noble Lord aware that, whereas everyone will regret the failure of repeated peace initiatives, the present deadlock is at least a considerable improvement on what went before?
Lord Trefgarne: My Lords, any situation which results in a reduction in the numbers of people being killed or maimed is to be regarded as satisfactory; but, taking the wider view, the continuation of this dispute cannot in the least be regarded as satisfactory, and I hope that it can swiftly be brought to an end.

Prison Chaplains: Appointments
2.52 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 how chaplains who have visiting access to the young detained in HM prisons are appointed, and where the responsibility for such appointments lies.
The Minister of State, Home Office (Lord Elton): My Lords, full-time chaplains are recruited by the Civil Service Commission and appointed to particular establishments by the Prison Department on the advice of the Chaplain General or the principal Roman Catholic chaplain. Part-time chaplains and other visiting ministers of religion are appointed by the Prison Department, on the recommendation of the bishop or outside religions body concerned.
Lord Campbell of Alloway: My Lords, I thank my noble friend the Minister for that reply. May I ask what steps, if any, are taken to avoid the appointment to such posts of active male homosexuals, and, in particular, whether current procedure is apt to prevent access to the young detained in our prisons?
Lord Elton: My Lords, the interviewing procedures before appointment are very careful. I have inquired and can find no record of any instances of homosexual practice or behaviour by chaplains within the past 25 years.
Baroness Gaitskell: My Lords, may I ask the noble Lord the Minister whether he does not think that the Question by the noble Lord, Lord Campbell, is a very important and deep one which should be looked at really very well and should be taken into account?
Lord Elton: My Lords, it has been looked at well and it is taken into account.
Lord Avebury: My Lords, can the noble Lord say what progress has been made in the consideration of recognising Rastafarianism as a religion and appointing chaplains to administer to the needs of Rastafarians in the prison system?
Lord Elton: My Lords, I hesitate only to see whether I can find any way of bringing that question within the

1093
rules of order of this House. I can find no connection between the noble Lord's supplementary and the Question on the Order Paper.
The Lord Bishop of Derby: My Lords, would the Minister be willing to pass on the assurance that from independent episcopal experience the appointment of prison chaplains, certainly from the Church of England point of view, is carried out with very great thoroughness and very great judgment after a good deal of inquiry from people who know the particular candidates concerned? Would he be willing to mention the fact, if it gives some assurance, that every prison chaplain has also to be licensed by the bishop of the diocese, who is in duty bound to make careful inquiries before he gives the licence?
Lord Elton: My Lords, I am happy to acknowledge the considerable value, both of the work of the Church authorities in finding and screening appointees and also of the work of the chaplains themselves in the Prison Service, which is of enormous value.
Lord Avebury: My Lords, will the noble Lord agree that if Rastafarianism is recognised as a religion then the appointment of chaplains ministering to the needs of Rastafarians in prison arises from the Question, and that therefore he ought to answer my supplementary?
Lord Elton: My Lords, Rastafarianism is not recognised as a religion within the Prison Service, and therefore the question does not arise at present—to which I should add that prison chaplains nonetheless have the care and welfare of all inmates of the prisons within their care and attend to Rastafarians as well as to others.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Avon will, with the leave of the House, repeat a Statement that is to be made in another place on the coal dispute. This will be followed by my noble friend Lord Lyell, who, again with the leave of the House, will repeat a Statement on terrorist killings in Northern Ireland.
Representation of the People Bill
The Bill, having been brought from the Commons on Friday last and printed pursuant to Standing Order 48, was read a first time.

London Regional Transport (Amendment) Bill
2.56 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that the London Regional Transport (Amendment) Bill be read a second time.
The purpose of this Bill is to settle the amount of grant to be paid by the Greater London Council to
1094
London Regional Transport for 1984–85. There is no dispute that the GLC should finance LRT up to 31st March 1985. The Government took responsibility for LRT on 29th June—part way through the present financial year. By then, the GLC had already budgeted and precepted to support London Transport for the whole of 1984–85. So provision was made, in Section 49 of the London Regional Transport Act 1984, for the GLC to be directed to continue paying grants to LRT up to the end of the financial year. Without such a provision, ratepayers and taxpayers would have had to pay twice for the same services—once to the GLC, through their rate precept and through transport supplementary grant, and again after the GLC had lost responsibility for LRT.
Section 49 provided that the GLC should pay up to £360 million in grants for 1984–85, counting the period before the Government took over. This figure was made up of the GLC's revenue support determination for the year, which was £190 million, plus £170 million to cover LT's capital programme. Under the terms of Section 49, the Secretary of State for Transport could direct the GLC to pay up to £360 million, less any grants paid in respect of 1984–85 before the direction was made.
In the event, my right honourable friend made his direction on 29th June 1984. Acting on the information then available to him, he deducted £78.7 million in respect of grant payments made before 29th June. That left a balance of £281·3 million, to be paid in instalments up to the end of March this year. In directing the GLC to pay the full balance of £281.3 million, rather than a lesser sum, my right honourable friend had two principal considerations in mind. First, as far as revenue support was concerned, LRT were predicting a small deficit for the year, after receipt of grants, at the time the direction was made. Although the revenue outlook had been improving in the period immediately before 29th June, there was no way of knowing whether the improvement would be sustained. There were also risks which could have adversely affected the revenue account position. On balance, there was no basis at that time for assuming that LRT would need less than the full amount of revenue grant determined by the GLC.
Secondly, for capital grants the GLC had budgeted to pay £149.2 million—£20.8 million less than the amount provided for in Section 49. But that figure of £149.2 million did not represent the full cost of LT's capital programme for 1984–85, as agreed by the GLC. After the Government had fixed the GLC's capital allocation for 1984–85 on the assumption that the whole of LT's capital programme would be covered by grant (as had always been the GLC's practice in the past) the GLC had decided that LT should finance £27 million of expenditure by leasing, which is effectively a form of borrowing. There were two underlying reasons for this change of policy. First, the GLC hoped that it would enable them to evade the Government's system of capital controls, by reducing the amount of grant which they had to pay to LT for 1984–85. They would then be able to spend more in other areas. Secondly, the GLC hoped that they could escape altogether responsibility for funding part of LT's capital programme, since they knew that they might lose control of LT at some point during

1095
1984–85, and most of the cost of the leases would then fall on LRT in future years.
My right honourable friend made it quite clear when the London Regional Transport Act was being considered in the other place that the Government did not regard the use of leasing in these circumstances as acceptable. Indeed, he said that he would require the GLC to pay the full amount of capital—£170 million—subject to the final determination and checking of figures. As I have explained, £20.8 million was available within the £170 million ceiling imposed by Section 49 of the LRT Act to help service the costs of the leases which LT had signed while under GLC control. Calculations on a reasonable range of assumptions about future real interest rates showed that, if anything, £20.8 million was somewhat less than sufficient to cover the cost of the leases. Accordingly, my right honourable friend saw no reason why the GLC should not be directed to pay the full amount of capital, and he instructed LRT to use the £20.8 million to set up a reserve to help pay for the leasing commitments.
That is the basis on which the Section 49 direction was made. My Lords, as you know, the GLC subsequently challenged the direction in the courts on a number of grounds. For one thing, the GLC claimed that the amount of grant which they had paid in respect of 1984–85 before 29th June was £88,920,412—some £10·2 million more than they had been given credit for in the direction. On the evidence available to my right honourable friend when the direction was made, it was indeed the case that the GLC had made payments to LT amounting to £10.2 million at the beginning of this financial year. But those payments had been requested by LT to settle their accounts with the GLC for the previous financial year, 1983–84. Subsequently, further evidence came to light which showed that the GLC had instead labelled the payments as being in respect of 1984–85, leaving the position for 1983–84 unresolved. While LT had disputed this decision, the GLC were in charge at that time and LT had had no alternative but to agree in the end.
Another ground of challenge concerned the GLC's Money Bill for 1984, which made provision for their capital expenditure for 1984–85. At the time the Section 49 direction was made, the other place had agreed an instruction to the Committee considering the GLC's Money Bill to the effect that, unless the GLC came forward with specific proposals for expenditure reductions, an across-the-board cut should he made, amounting to some 7½ per cent. At the time of making the direction, my right honourable friend did not feel able to take account of this prospective cut in respect of LRT's capital expenditure, first because it was still open to the GLC at that time to come forward with proposals to reduce overspending on other programmes; and, secondly, because even if the reduction were subsequently implemented, the GLC could vire between expenditure blocks. In the event, the GLC made no proposals and the 7½ per cent. reduction across the board was duly implemented, after the Section 49 direction had been made.
The Bill which is before us now takes account of both the Money Bill point and the £10.2 million paid before 29th June. Although the Government take the
1096
view that the GLC should have settled up with LT for 1983–84, we accept that it would go beyond the original intentions of Section 49 to require them now to do so. The figure of £258, 179,588 specified in the Bill therefore gives the GLC credit for the additional £10.2 million of grants paid before 29th June. Furthermore, since the GLC's Money Bill has now been enacted with the reductions imposed by the House of Commons, this Bill accordingly reduces the amount of capital grants to he paid by the GLC by £12.9 million. In total, the amount of grant which this Bill requires the GLC to pay is therefore some £23.1 million less than they would have had to pay under the original Section 49 direction. LRT will have to absorb this loss of grant.
These two points having been dealt with, there remain two substantive points at issue between the Government and the GLC. The first concerns the leasing reserve of £20.8 million, which I have already mentioned. The GLC took the view, and argued in court, that they should not be required to make any grant payments to LRT over and above what was needed to meet LRT's strict cash requirements in 1984–85. Although Government Ministers had made it absolutely clear during the passage of the LRT Act that they intended to require the GLC to cover the leasing liabilities, the courts ruled that the direction made under Section 49 should not have included the leasing reserve.
The second point at issue concerns whether the GLC should be required to meet other liabilities which LRT have accrued, and which will show in their accounts for 1984–85. Since 29th June, when the Government took control of LRT, their management have been able to generate additional fares income and to cut costs. On the latest forecasts, allowing for the effects of this Bill, LRT expect to have a cash surplus of some £30 million at the end of this year. But they also have substantial liabilities amounting in total to some £37 million which will appear in their accounts for this year.
Although the sums of money involved in the leasing reserve and the argument over the cash surplus are separate, the issue of principle is the same for both. The GLC argue that they should have a rebate of some £50 million on their grant payments to LRT—in addition to the £23 million which your Lordships will recall is already conceded by this Bill—and that the liabilities and leasing commitments should fall as a charge to LRT in future years. The Government's position is that it would be quite wrong for the GLC to be credited with £50 million to spend as they wish, while leaving LRT to carry forward unfunded liabilities which will fall as charges on passengers and ratepayers in future. This would be unfair to passengers, who have contributed a large part of LRT's expected cash surplus for this year. It would also be unfair to ratepayers who have already paid through the GLC's precept to support public transport services for this year. In fact, it would amount to asking them to pay twice for the same service. That is why the Government are not prepared to concede further sums of money to the GLC.
I have explained how the provision in the Bill has been derived and why the Government consider it to be fair and reasonable as between the parties

1097
concerned. But the Bill has also raised wider issues, one of which is recognised in the amendment tabled by the noble Lord, Lord Tordoff, and I should like now to deal with three such issues.
First, it has been alleged during the consideration of this Bill that the Government are seeking to use ratepayers' money to create a surplus which will somehow be applied, at least in part, to the benefit of the Exchequer. That is simply not true. As I have explained, although LTR expect to have a cash surplus of some £30 million this year, they have some £37 million of liabilities to set against that. So the grant which this Bill provides for is certainly not more than enough, on present forecasts, to meet LRT's needs.
I can also assure your Lordships that there is no question of any of this money benefiting the Exchequer, for example, by enabling the Exchequer contribution to LRT's grants for next year (1985–86) to be held down to below what it would otherwise be. On the contrary, the Exchequer contribution for next year has been fixed at £35 million higher than this year. It was determined using the same principles as are applied to the calculation of Exchequer support for local authority services generally, so as to be fair to ratepayers in London and elsewhere. Any further increase in the Exchequer contribution to LRT would unfairly reduce the amount of Exchequer grant available for distribution to local authorities. So if LTR did not have the cash surplus and had to carry forward unfunded liabilities into 1985–86 and future years, those costs would have to fall on passengers and ratepayers. It is therefore passengers and ratepayers who will derive the whole benefit of LTR's expected cash surplus for 1984–85.
The second point of principle concerns the passage of legislation to deal with the outcome of a decision in the courts. There are many precedents for this. One thinks immediately of the field of taxation, where it is not unusual for laws to be passed to clarify areas where the courts have brought to light what the Government regard as loopholes in existing laws. During consideration of this Bill in the other place, my right honourable friend mentioned two precedents in the field of transport legislation, both concerning travel concessions. The Public Service Vehicles (Travel Concessions) Act 1955 was passed because the Appeal Court ruled that Birmingham Corportion was in breach of its fiduciary duty to ratepayers in offering travel concessions to elderly people. The Act then gave local authorities who ran transport undertakings the power to provide such concessions. More recently, the Travel Concessions (London) Act 1982 was passed to give the GLC specific powers to finance concessionary travel schemes after legal action by the London Borough of Bromley had called their powers into question.
However, the important question is not whether there are precedents, but whether legislation is necessary and justified in this particular case. I have tried to demonstrate that it is. It is quite clear, particularly in respect of the leasing reserve issue, that the courts took a different view of the scope of Section 49 than the Government had intended in bringing the legislation before Parliament in the first place. The judgment also cast doubt on the extent to which the
1098
other liabilities which I have mentioned might be admissible within the terms of Section 49.
It is right that the amount of grant should be settled by the Government, with the approval of Parliament. I have explained to your Lordships why the Government consider that the provision in this Bill is reasonable. I am sure your Lordships will accept that the arguments which I have put forward are not legal arguments. They are policy arguments. It is not for the courts to determine the policy; nor have the courts presumed to do so in this case.
Moreover, your Lordships will appreciate, I am sure, that there is a need to settle the amount of grant to be paid once and for all, particularly now that we are fast approaching the end of the financial year. Both LRT and the GLC need to budget and plan ahead for 1985–86.
In sum, in the circumstances of this case, legislation is both necessary, to settle the matter quickly and beyond doubt, and desirable, to enable the Government and Parliament to determine the outcome on proper policy considerations.
I come last of all to the issue of retrospection. I fully recognise the strong feeling in this House against measures of a retrospective nature. That is not to say that retrospective legislation is never justified, but it should be regarded as an exceptional measure. Concern has been expressed, both in the other place and by the noble Lord, Lord Tordoff, in his amendment before us this afternoon, that this Bill is to some extent retrospective. I hesitate, in front of the legal experts in this House to be dogmatic on what is or is not technically retrospective. But I think it may be instructive to re-examine, very briefly, the circumstances surrounding this Bill.
The law as it has stood since the London Regional Transport Act received Royal Assent last June requires the GLC to pay up to £360 million in grants to LRT for 1984–85, counting the three months before the Government took control. To date the GLC has paid some £265.9 million: £88.9 million up to 29th June, when the Section 49 direction was made, and £177 million under the now void direction. There is no doubt that the potential liability of the GLC is that amount and more. The High Court judgment on 11th January opened up the question: How much more? This Bill will resolve the matter. It will make no unforeseen demands upon the GLC; nor does it seek to make lawful the original Section 49 direction which has been quashed by the courts, or to amend Section 49 with retrospective effect. In fact, the GLC's liability under this Bill will be £23 million less than it was before under the London Regional Transport Act and under the Section 49 direction. I do not believe that this measure deserves the stigma which is commonly attached to retrospective legislation. The circumstances of the case do not warrant it.
The Government did not lightly bring this new legislation before Parliament. We did so because there were issues of principle to be resolved, in the interests of passengers and ratepayers. Legislation offered the only certain prospect of resolving these issues quickly and satisfactorily. I have sought to demonstrate that the Government are simply seeking to secure an outcome which is fair and reasonable to passengers,
1099 London Regional Transport

1099
ratepayers, LRT and the GLC. I am sure that your Lordships will support that objective and on that basis I commend the Bill to this House.
My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(Lord Brabazon of Tara.)
3.13 p.m.
Lord Tordoff Lord Tordoff rose to move, as an amendment to the Motion that the Bill be now read a second time, at end to insert "whilst this House regrets the retrospective nature of this legislation".
The noble Lord said: My Lords, I beg to move the amendment standing in my name on the Order Paper. We are grateful to the noble Lord, Lord Brabazon of Tara, for his clear exposition of the Government's position on this Bill. As he rightly said, we are dealing here with an amendment to Section 49 of the London Regional Transport Act, which received the Royal Assent on 26th June last year and which set up a system whereby the Secretary of State, having created a nationalised industry, to the surprise of some of his friends, was enabled in future to levy the London boroughs for two-thirds of the grant in aid which is needed to run London Regional Transport, the balance coming from the taxpayer. But there was, as the noble Lord said, special provision for the interim period—that is to say, the first year from 1st April last to 31st March this year—so that the Secretary of State could demand from the GLC that it pays to London Regional Transport the sum of £170 million plus the revenue grants as determined under the 1969 Act, which I think the Government claim is a figure of £360 million.
The new Bill, on the other hand, removes that basis of calculation and substitutes a figure of £258.2 million approximately. On 29th June, three days after the Bill became law, the Secretary of State made a direction which said that this was on the basis of "calculations attached", and this was in the sum of £281.3 million. Unfortunately, the calculations were not attached. That is a pity, because it might have been easier to follow the progress of this problem if they had been attached at the time. But we all make mistakes.
The GLC then disputed this amount and went to court for a judicial review. Mr Justice McNeill, in a long judgment of some 110 pages, said that the Secretary of State had acted unlawfully in a number of aspects and among those aspects was the seeking to achieve what he described as non-transport purposes; that is to say, he took more than he required for the running of London Transport, in order to stop the GLC from spending money in other directions. That might be something which would commend itself to noble Lords, because a number of noble Lords do not like the GLC spending money. I do not want to get into that argument today, and we all have our own views on it.
Nevertheless, Mr. Justice McNeill said that that was an unlawful act. He also said that it was unlawful to seek to establish a leasing fund of £20.8 million, to which the noble Lord the Minister has referred, because this is indeed in respect of leasing which will go on for some considerable period beyond the current year. It may be that there was, as the right honourable
1100
gentleman the Secretary of State said in another place, a certain amount of creative accounting going on in the GLC at that time. I do not dispute that. But the fact is that the judge has said that it is not lawful for the Secretary of State to provide for the leasing of buses in this way.
In conclusion, Mr. Justice McNeill used what are now becoming the immortal words—immortal because I think that they have been used in every debate in the last few weeks—that,
"The Secretary of State acted unlawfully, irrationally and procedurally improperly in giving a direction which exceeded his statutory powers".
Your Lordships should notice that this is not just a simple misinterpretation of an Act which is less than a year old. The Secretary of State has acted ultra vires. He had asked for more from the GLC than he was entitled to ask for, and to do so was unlawful and is still unlawful at this moment, as I speak.
The Secretary of State then had a number of options open to him. He could have appealed. I believe that he did not appeal, because he knew that he would not win. He said that he did not appeal because it would have left things in a state of uncertainty. Either way, it was an option which was open to him and which would, in the end, have cleared up the matter either in his favour or in favour of the GLC. He could, more positively, have made a lawful direction, which would have left him with sufficient money to provide for London Regional Transport during the coming year—that is to say, with enough revenue to expend on its current requirements—which is what I think most of us, when this Bill went through the House previously, understood it to be about. But he failed to do that. Instead, he brings a Bill before Parliament, and takes it through the other place in two days, in order to make lawful that which at the moment is unlawful, not just from now, but back to 1st April last year.
Perhaps, in response to what the Minister has just told us, I may draw your Lordships' attention to what the Bill actually says. Clause 1(1) states:
"The Greater London Council shall under this section pay to London Regional Transport by way of grant for the initial year (that is to say, the financial year ending on 31st March 1985) the sum of £258,179,588".
To me, the financial year starts on 1st April 1984 and clearly, on the face of the Bill, it is retrospective in form. It is certainly retrospective in effect.
Let us now come to the sum which is being demanded on the face of the Bill. It is, as the noble Lord has said, lower than the original figure, and it is lower by £23.1 million because the Secretary of State got his sums wrong. He got his sums wrong partly because he did not actually consult the GLC on the facts of the case. He says that he did not do that because he would not have got a proper answer. Again, those of us who have read the judgment by Mr. Justice McNeill will know that that got its come uppance from him. He says in fact that surely the Minister would not have gone into consultation without assuming that there could be some change on his part. But anyway he does accept now that the original figure was wrong, and that this was partly reduced because of the carry over from 1983 and partly reduced by the smaller capital needs of LRT in the current year.
At this point we have to say quite clearly that LRT is now functioning well, though not necessarily to the benefit of the fare paying passengers who are having to pay higher fares—which perhaps touches on the point made later on by the noble Lord, Lord Brabazon of Tara. Nevertheless, it is functioning, and it would be idle of us to pretend otherwise. But the new figure, the lower figure, of £258.2 million still includes £20.8 million for leasing reserve, which Mr. Justice McNeill said is at this moment unlawful.
It also includes £29.5 million surplus to the revenue needs of LRT which, we are told, is required for a number of things, including (the Minister did not mention this) redundancy payments—redundancies which have not yet been declared or asked for. In other words, these are payments into subsequent years and not part of the revenue requirement of LRT during the current 12-month period. This, again, Mr. Justice McNeill said, was unlawful and remains so.
The Secretary of State is trying to get £50 million which at this moment he is not lawfully entitled to do, and one can understand why he did not go to appeal. He has made a mistake and he seeks to cover it by an Act of Parliament, which I submit to your Lordships is operating retrospectively. Furthermore, he introduces it to your Lordships' House as a Money Bill. I may make no criticism of that because the Bill bears the Speaker's Certificate; it would be improper for me to criticise that. It is clearly a Money Bill because the Speaker says it is a Money Bill; but I think it is regrettable that the Government saw fit to bring a Bill to this House in this way, having forced it through another place in two days with a very large whip majority. The only place where it could ordinarily be amended is your Lordships' House and we are precluded from doing that by the terms of it being a Money Bill.
Perhaps I may quote my noble friend Lord Diamond on the question of retrospection. At column 592 of the Official Report of 29th January, when we were discussing a Statement from the Secretary of State which was repeated in this House by the noble Lord, Lord Brabazon of Tara, the noble Lord said:
"although Parliament can do a great deal, it cannot bail the Government out on every mistake they make? If the Government have made a mistake and have been supported by Parliament, and the court has drawn attention to that mistake, the law is the law as the judge has decided. That covers the period up to the date when the new legislation is brought in or is effective. In those circumstances, how can the Government possibly justify coming to Parliament with a proposal which is flatly in contradiction with what the judge has decided was the law of the land at the time the judge was asked to make the decision?"
That is the position we take from these Benches, and I am grateful to my noble friend for putting it so clearly.
Because it is a Money Bill we cannot effectively amend it. Retrospective legislation always causes concern in your Lordships' House. Indeed, the noble Lord, Lord Brabazon of Tara, has indicated that in some way he goes along with that. People acting lawfully should not later be penalised by their actions being made unlawful retrospectively. Nor do I believe that Ministers acting unlawfully should be able to legalise their action in retrospect.
Of course we all recognise that there are occasions when Governments have no option other than to do this, where there are extremely grave matters at risk, for the good of the nation and for the safety of the state. But these should be very few, they should be of the last resort, and they should be for serious purposes. This Bill, I submit to your Lordships, is neither. It is neither because it is not the last resort when the Minister could have made a lawful direction; nor is it a serious purpose because LRT will have sufficient money in 1984, even without the extra £50 million.
In that same discussion on the Statement, at column 591 of the Official Report of the same day, 29th January, the noble Lord, Lord Harmar-Nicholls, whom I am sorry to see is not in his place today, said:
"I should hate the principle of retrospection to be brought here. I think retrospective legislation is bad and unfair. Although this may have elements in it which would perhaps justify a certain element of retrospection, I hope the Government will forgo that for the benefit of the higher principle of not having retrospective legislation".
I believe that the Government should have forgone the benefit of the extra £50 million, however much they believe it is justifiably the property of London Regional Transport, for the higher principle of not having retrospective legislation. They have decided not to do so. It is a matter of regret, and I ask noble Lords to join me in saying so. I beg to move.
Moved, as an amendment to the Motion that the Bill be now read a second time, at end to insert "whilst this House regrets the retrospective nature of this legislation".—(Lord Tordoff.)
The Deputy Speaker (Lord Nugent of Guildford): My Lords, the original Question was, That this Bill be now read a second time?, since when an amendment has been moved in the terms set out on the Order Paper.
The Question I now therefore have to put is, That this amendment be agreed to?
3.26 p.m.
Lord Boyd-Carpenter: My Lords, there appear to be three points which arise in this debate: first, the merits of the Bill; secondly, whether or not it is retrospective, which is obviously a matter on which opinions can differ, and there will no doubt be some argument; and, thirdly, the procedure which the noble Lord, Lord Tordoff, has seen fit to adopt in putting down what courtesy demands I should describe as "a reasoned amendment."
I shall comment first, if I may, on the third point. This is a Money Bill under the Parliament Act. It bears Mr. Speaker's Certificate, and as the noble Lord, Lord Tordoff, very properly said, it is not for any of us here or elsewhere to question that certificate. We are dealing with a Money Bill, and the first point that I think your Lordships will want to consider, whatever view you take on the merit, is whether it is an appropriate action for this House to append a critical amendment to the Motion that a Money Bill be read a second time.
There is a certain irony in the fact that this proposal should come from the Liberal Benches. It was, after all, the Liberal Party which some years ago passed the Parliament Act, and there are some of us here—one

1103
sitting very near to me—whose forbears did their best to prevent that coming into law. But it was passed into law, and while I do not argue to your Lordships that in any strict sense it is out of order to put down a reasoned amendment to a Money Bill, I am going to suggest that it is a very unfortunate practice; and let us see where it leads.
Your Lordships may well dislike other Money Bills that come from another place. Indeed, were there to be a change of Government, there might be intense dislike of some of those Money Bills. But accepting, as we do, the terms of the Parliament Act—that we cannot amend a Money Bill, that we cannot delay it for more than a month—are we really going to say, "But we can tag on to the Motion for Second Reading what is intended to be a critical and perhaps even an offensive amendment"? That seems to me a most unfortunate posture for your Lordships' House to adopt. It has an atmosphere of "willing to wound, but unable to strike". I suggest to your Lordships that it is an attempt to undermine the principle, which has been accepted since 1911, that your Lordships' House, though co-equal in other matters with the other place, apart from the delaying factor, does not touch Money Bills.
I suggest that whatever view your Lordships take of the merits of this proposal—and I will address a word to that aspect in a moment—it would he wrong to add an amendment of this kind to the Motion for a Second Reading. I will go further and say that such action would be harmful to the relations between this House and another place—when we should appear to be taking upon ourselves the right, although we cannot amend, to pass derogatory comments on what another place has done. I suggest to your Lordships that that is not an appropriate posture for your Lordships' House to take.
I profoundly hope that your Lordships will—whatever view you may take of the merits—hesitate to take such action. In view of the opinions held by the Official Opposition on the Benches of this House, I am bound to observe that it would be a very strange inconsistency were the Official Opposition to declare that, despite their wish to abolish this House, and despite their hostility to its powers, they would support this House coming in with a rude commentary on a matter which—under the Parliament Act—falls well within the discretion and responsibility of another place, and another place alone, to enact.
Whether or not there is retrospection here depends a good deal, I suppose, on one's philosophy. I am sure some of your Lordships could mount a perfectly good case for saying that this provision was retrospective. But is the sense of it such as to offend the reality which lies behind the dislike we all have of retrospection?
The harm of retrospection consists in changing the law so that people who have acted previously in the belief that the law was different are disadvantaged. It is difficult to establish that that is the case here. It was known very soon after the decision of Mr. Justice McNeill—and of course decorum forbids me from making any comment on the decision of the learned judge, whatever views I may hold—that the Government were intending to restore the position to
1104
what they had thought it to be. As far as I can see, no one has been prejudiced by the fact that for a matter of days, the law appears to have been different to what it will be when this Bill becomes an Act.
One can take this matter further. The GLC precepted local authorities and their ratepayers at the beginning of the year for this money for London Transport. The GLC has had this money, through the precept, for a considerable period of time. As far as the ratepayers are concerned, they have not been misled. They paid the money through their rates to the GLC, and the only question that arises now is whether the GLC—having precepted on the boroughs and on their ratepayers for this money—should keep that money and use it for other purposes. That would be an intolerable state of affairs.
The noble Lord, Lord Tordoff, sought to argue that there was retrospection because of the provision, to which he invited our attention, in Clause 1(1) of the Bill—under which payment has to be made in the current financial year and which, as he reminded us, ends on 3Ist March. We are only at the beginning of March and that subsection does not include any provision for payment of the money other than in a period, or by the end of a period, for which this Act, it is hoped, will be in force. With respect to the noble Lord, Lord Tordoff, his argument in respect of the current financial year does not carry any weight at all.
As to the merits of this matter, the arguments seem to be very simple. The GLC, whose general attitude, as your Lordships know, has been one of hostility to this measure as to all the Government's measures, has been reluctant to help in the work of London Transport. Indeed, through its representatives on LRT it has done a good deal to obstruct the improvements which are being made. Your Lordships have before you the simple fact that the GLC undertook, by the exercise of its precept, to raise funds to make the contribution to London Transport, and it would be absurd to allow the GLC to retain those funds and use them for such other purposes as they want—such as, presumably, plastering London with propaganda pointing out what wonderful people the GLC were.
The whole essence of the attack made on this Bill is that the Government, having apparently made a mistake—according to Mr. Justice McNeill—should then, instead of legislating, have accepted that mistake (leaving the GLC with what would have really been their ill-gotten gains) or should have appealed. Certainly the Government could have appealed, but your Lordships know that the appeal process—and I am very glad that the noble and learned Lord the Lord Chancellor is no longer on the Woolsack—is not always a matter of great celerity. If this matter is to be tidied up by the end of the financial year for the sake of all concerned, and particularly for those Londoners who require the efficient operation of London Transport, there would not have been time for a successful appeal.
It seems therefore that the Government are taking the only action that they can in clearing up a difficult situation, and that if the first attempt to obtain these due payments failed for whatever reason, good or bad, then the honest, sensible and practical action is to come to Parliament and ask Parliament to put that matter right. That is what this Bill seeks to do.

The Miners' Strike
3.37 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (The Earl of Avon): My Lords, with the leave of the House, I shall now repeat a Statement on the coal dispute which is being made by my right honourable friend the Secretary of State for Energy in another place. The Statement reads as follows:
"With permission, Mr. Speaker, I wish to make a Statement about recent developments in the coal dispute.
"Yesterday, at a delegate conference of the National Union of Mineworkers, a decision was made to end the industrial action which has been conducted by some sections of the NUM over the past year. The conference decided that there should be a return to work tomorrow.
"The Government regret that this unjustified dispute, which has taken place without a ballot, has done so much damage to miners, to mining communities and to the coal industry. Without this dispute, the industry would have received £800 million of captal investment during the past year; miners' pay would have been substantially above average industrial earnings; 1,000 firms would have been persuaded to convert to coal; export orders would have been obtained; and any miner in a pit facing closure would have been given the opportunity of continuing to work in the industry or of taking advantage of early retirement provisions more generous than those available in any other industry.
"The dispute has inflicted heavy damage on the coal industry, and on those companies which supply that industry with plant and machinery.
"However, I am pleased to tell the House that during the period of this dispute, industry at large was able to obtain the energy supplies it required. There were no power cuts due to the dispute, and there are still nearly 12 million tonnes of coal stocks at Britain's power stations.
"I would like to express the Government's appreciation to all those people whose efforts have ensured that Britain's energy supplies have continued to be available.
"I believe the country would also like to thank the police who, throughout this dispute, have ensured that organised mob picketing did not deprive people of their freedom to go to their place of work. Sadly, during the dispute, 1,391 police officers have been injured.
"It is now vital that the coal industry swiftly returns to normal working and recovers from the damage of the past 12 months.
"The National Coal Board have stated that obtaining full safety in all pits is their first priority, so that production can be restored.
"Both the National Coal Board and the Government hope that the coal industry will now take full advantage of the considerable opportunities available both at home and abroad".
My Lords, that concludes the Statement.
Lord Stoddart of Swindon: My Lords, I thank the noble Earl for repeating the Statement which was made in the other place. While there will be a sense of relief that there is to be a return to work tomorrow, does he not agree that a negotiated settlement would have been the best way to end this dispute, both for the miners and for the industry? If the noble Earl does so agree, why did the Government not accept the proposal from the National Union of Mineworkers that it was prepared to sign and implement in full the NACODS agreement when the Secretary of State himself stated on 4th February that if the NUM wished to accept it, it could have a settlement "today or tomorrow"? Is it not a fact that until the modified colliery review procedure is in operation, all pits will remain open? Is he aware that only today the general secretary of NACODS stated that the new procedure cannot be put in place until the NUM is party to the agreement?
Can the noble Earl assure us that there will be no victimisation of miners who have remained on strike throughout the dispute? Will the Government urge on the NCB magnanimity in its dealings with the miners who have been convicted of minor, or relatively minor, offences during the dispute? Is the noble Earl further aware that there is widespread concern over the future of mining communities and that people living in those communities view their future with despair? In the light of that, will the noble Earl impress upon the Secretary of State the need to take urgent and exceptional measures to increase substantially the finance available to NCB enterprises and to intervene directly to bring new industries to the blighted areas?
Finally, can the noble Earl impress upon the NCB that a strong coal industry is vital to our country's future and to achieve this will require the wholehearted co-operation of the total workforce? Will he and his right honourable friend the Secretary of State therefore urge upon the NCB the use of the velvet glove in a hand of friendship rather than the strong arm and an iron fist?
Lord Ezra: My Lords, I should like on behalf of these Benches to express satisfaction that this sad dispute is due to end tomorrow. The main objective for the coal industry must now be to rebuild its fences, get the industry moving again and repair the physical and human damage that might have been created by this long-running strike.
There are, in fact, some short-term market opportunities facing the British coal industry at the moment. Due to the change in the value of the dollar, at which imported coal is quoted, British coal is now very much more competitive. It is very important that this short-term market opportunity is seized on behalf of all in the mining industry and the rest of Britain. If this short-term opportunity is seized successfully the long-term prospects will look all the brighter. Therefore, I propose that there should be an approach to the affairs of the coal industry now that the strike is being brought to an end which will lead to a sympathetic attitude on the part of all within it to try to recover the lost ground, seize the benefits of the short term and build for the future—which will involve substantial, continued investment and on which I hope the noble Earl will reassure us.

1107
However, in those cases where mines, for whatever reason, might have to be closed, redoubled efforts must be made to bring alternative employment in the area. Here I join with the noble Lord, Lord Stoddart, in saying that the amount of money so far made available for this purpose seems inadequate. I hope that we can obtain an assurance from the Government that this money will be substantially increased in order for this transition in those areas where mining has to cease and other activities take their place to be adequately financed.
The Earl of Avon: My Lords, I am grateful to both noble Lords. On the agreements, I think that over the past year we have had enough talk from Mr. Scargill to last us for a very long time. With regard to the amnesty, no one can in any way condone the acts of serious violence, intimidation or vandalism. However, men may have been dismissed for offences of a very much less serious nature: for example, unruly but not violent or intimidatory behaviour, or trivial theft. In such cases it will be up to the NCB to show what moderation it wishes by either reinstating or re-engaging such men. The conciliation machinery is there and therefore can be used.
I should like to remind the House of the question which the noble Lord, Lord Shinwell, put last week. Personally, I endorse every word of it, and having read it in Hansard I go along with it. The noble Lord, Lord Ezra, made three points. On marketing the National Coal Board was becoming quite successful when the strike started. I assure the noble Lord that we shall get cracking as quickly as we can. As regards investment the Government will undertake the new investment. To turn to the enterprise board, the NCB have given some money towards this which at the moment looks like being adequate; but we shall of course ask the board to keep a close eye on the situation. I shall close by saying to both noble Lords that we should like to see a very strong coal industry, and that surely is the aim of the National Coal Board, too.
Lord Shinwell: My Lords, the noble Earl, Lord Avon, has been generous enough to refer to an observation in which I indulged recently. I would not wish to withdraw a single word that I uttered on that occasion. I venture to suggest—and I can do no more than make a suggestion as I have no authority or power in the matter—that there should be no discrimination as between one section of the industry and another now that there has been a partial closing down of this very unseemly and, in my judgment, unnecessary dispute. This is a matter for questions and not debate, and I ask the noble Earl whether he is aware that this is history repeating itself. A great many people have taken part in the debates in this matter in one way or another—some rightly, and many wrongly because they are not aware of the overtones and undertones of this very difficult subject.
Many people may think that the dispute has been settled, but of course nothing of the sort has happened.
Pretty much the same thing happened rather more than 30 years ago when we had Mr. Arthur Cook—the forerunner of Mr. Arthur Scargill and, indeed, much more venomous, if that is possible, than Mr. Scargill. Very few noble Lords were around then. I doubt
1108
whether even the noble Lord, Lord Boyd-Carpenter, was. I cannot remember him being in the other place at that time. But I was, and I was closely associated with it because I was Secretary for Mines and I had to deal with the subject. On that occasion, when there was a dispute the Government intervened—and I happened to be working on behalf of the Government—in order to prevent the dispute continuing and developing, as a result of which we did not see many of the unseemly incidents which have occurred in this recent trouble.
Is the Minister aware that I express a view which I am sure is accepted by every Member of your Lordships' House when I say that many of the things that happened during the dispute were intolerable in a civilised society? The police undertook their duties as they were rightly entitled to do. Therefore, there should be no criticism against them if sometimes they acted in an unseemly and difficult fashion. One can understand it, and there should be no criticism of that kind.
I ask the noble Earl to note this. There has been a partial closing down of the dispute. But look at the newspapers—at the glorification in the Telegraph this morning, and at the leading articles in the Sunday papers! How delighted they are! And they point out how delighted Mrs. Thatcher, our Prime Minister, must he because she has gained what she set out to gain—if not to destroy the miners' union, to weaken it and the trade union movement generally to such an extent that they will offer no trouble for a long time to come. This is not a question, but my advice to the Government is that they be very careful indeed. They should consider what happened on the last occasion. The Cook development led to the General Strike, and after the General Strike the miners stayed on strike for eight or nine months. There has been any amount of bitterness since—and there will be a great deal of bitterness for some years to come, unfortunately.
If anybody thinks that everything in the garden will now be lovely and that the members of the Coal Board are anxious to help the miners to have a negotiated settlement and to have no trouble, he is mistaken. They will use this advantage in a way that I and many of your Lordships will dislike. I beg the Government now to use all the influence that they possess, even at this late stage—it is a late stage, but it is better late than never, if I may use a cliché—to ensure that there is no victimisation whatever and that miners who are unemployed or are likely to be unemployed will gain other employment of some kind, or, if not, will not be reduced to a condition of semi-starvation and poverty. I hope that the Government will do that. If they do, it will be of some advantage. But if anyone in your Lordships' House imagines that this is the end of the story, he simple does not know the miners as I know them; he does not know the history of the mining industry that I and many other noble Lords have read about.
We beg the Government to be very cautious indeed, and less discriminatory, less venomous and less glorying in what they regard as a victory for them. It is no victory, and it is certainly not a victory for the nation.
The Earl of Avon: My Lords, I join with the noble Lord, Lord Shinwell, in describing it as an intolerable situation—an intolerable strike, an intolerable dispute—and I also join with him in praising the police. I think his mathematics have gone a trifle awry. When he said "30 years ago," I think perhaps it was a mistake for 60 years ago. However, that is as may be. There has been no victory. The Prime Minister herself said yesterday—and I quote now off the top of my head—words to the effect that it is all over, and nobody has won.
What can I add to what the noble Lord has said? He went on for a little while. I should like to say that there will be no victimisation, either, and there will be no question of the people being re-employed—I am sorry, that is wrong. There will be no question of those who have done wrong things—
Lord Elwyn-Jones: My Lords, the noble Earl has not got it quite right.
The Earl of Avon: No, I have not, my Lords; the noble and learned Lord is quite correct. What I am trying to say is that those people who have been charged with offences will have the opportunity to—
Lord Elwyn-Jones: The noble Earl has done very well so far.
The Earl of Avon:—will have the ability to go to conciliation.
Lord Marsh: My Lords, may I ask the noble Earl whether he agrees that, while no one in the House would want to see the present situation followed by any attitude of vindictiveness to those people who have been out on strike in this long, sad and stupid dispute, one is entitled to ask the Government for an unqualified undertaking that those very brave men who have braved organised thuggery on an unprecedented scale for the past year will also be entitled to the protection of the Coal Board and the Government?
The Earl of Avon: My Lords, I can say that without hesitation.
The Earl of Lauderdale: My Lords, is my noble friend aware that the large-minded magnanimity which his Statement and that in another place have shown will be widely accepted, respected and welcomed throughout the country? Can he tell us whether there is yet any tally of the number of coal faces that have been lost, of the number of mining jobs lost in consequence, and of the value of capital equipment which has been irretrievably lost?
The Earl of Avon: My Lords, as far as concerns the number of colliery faces lost, I understand it to be in the region of 60. As far as concerns the number of jobs that will be lost, there has been no evaluation there. I also think it is a little too early to give the other figure for which my noble friend asked.

London Regional Transport (Amendment) Bill
Second Reading debate resumed.
3.58 p.m.
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Boyd-Carpenter, in a most interesting speech, chose to make the majority of his comments about the constitutional issue as between this House and another place, and on the issue of retrospection. On the first issue, I join with him whole-heartedly in feeling that this House should not in any way seek to increase its powers in relation to those of another place and in his spirited defence—perhaps somewhat belated—of the Parliament Act 1911.
It is unfortunate that the noble Lord did not find time in his speech to talk more about the merits of the issue, because this is what I wish to do, yielding to the noble Lord, Lord Tordoff, in his excellent exposition of the retrospection issue. The noble Lord, Lord Boyd-Carpenter, in his closing remarks, seemed to think that it was an open and shut case—that this Bill was the only choice open to the Government, that the Government were right to bring it forward and that it was in some way improper for this House even to comment on the Bill. I am not referring in this instance to the amendment on the Order Paper.
It is a fact that the London Regional Transport Bill was debated at considerable length in this House and assurances were given to your Lordships about the content of it. We therefore have some interest in seeing to it that its conditions, as they were explained to us by Government spokesmen, just as they were explained in another place, should be adhered to. In Committee in another place the right honourable gentleman the Secretary of State for Transport made it clear—and I believe that the assurance was repeated here, although I have not been able to find the reference—that it was the intention of the Act that the demand from the Greater London Council should be restricted to what was strictly necessary for the "operational needs" (those are the words in column 1114 of Hansard, at the Committee stage of the Bill in another place) of London Regional Transport in a particular year.
The importance of that is not just the importance of sensible year-on-year budgeting for London Regional Transport. In this case it is also a matter of there being a division of funding as between the passengers, the ratepayers and the taxpayers. Part of the Government support for London Regional Transport—a figure which can be determined by the Secretary of State and changed at will under Section 13(6) of the Act—is to come from the taxpayers.
Why is that significant? It is significant because if a surplus is to be carried forward from 1984 to 1985 it is to be carried forward at the expense of the London ratepayers only. The surplus will then be available not only for London ratepayers but also for the taxpayers in the year 1985–86. So there is a split, a change in the division, which has been determined by the Secretary of State with the authority of Parliament, as between the funding to come from the ratepayers and that to come from the taxpayers. I notice that the noble Lord, Lord Brabazon, in his opening speech, made the same mistake as that made by the Secretary' of State for

1111
Transport in another place. He repeated that the failure to pass this Bill would be at the expense of the ratepayers and passengers in a future year. He omitted to say that it would be to the benefit of the taxpayers.
The Government had three alternatives when considering the situation in which Mr. Justice McNeill found that the Secretary of State had behaved in all these terrible ways which the noble Lord, Lord Tordoff, repeated, and which I will forbear to repeat. First of all, they could have done nothing; they could have accepted that there would be a deficit carried forward. That would not have been such a terrible thing. After all, London Regional Transport is not a public service in the strict Civil Service sense. It is a business, and noble Lords who know anything about business will be aware that the accuracy of particular forecasts of cash surpluses carried forward can be very much questioned. I very well remember that when I was a member of the Greater London Council Transport Committee we were advised that to change the date of a fares change, a fares rise, by even one day, would make a difference of one and a half million pounds to the revenue of London Transport. Under those circumstances, clearly a cash surplus at March 31st of £20 million or even £30 million either way could depend on a quite a number of factors, such as changes in the weather or changes in the effectiveness of the fare rises which took place in January. Many matters of that kind could account for differences in the surplus carried forward. So it would not have been so terrible to have done nothing.
The second alternative was this Bill. I shall come back to that in a moment. The third alternative would have been to make a legal demand. The significance of a legal demand, as the judge made clear, was that that legal demand would have to be in accordance with the terms of the London Regional Transport Act. In other words, it would have to be for the operational needs of London Transport in 1984–85. The significance of the choice of the alternative of introducing a Bill is quite simply that the Government have not been prepared to make a legal demand, have not been prepared to reduce the demand for finance from the London ratepayers for the operational needs for London Transport. That is really the crux of the matter.
That is what the noble Lord, in his very lucid exposition, totally failed to make clear. He has found no way out of the dilemma that a Bill is necessary only because the Secretary of State is determined to go outside the terms of his own 1984 Act. If that were not the case, a legal demand would be entirely possible. I ask the noble Lord, in summing-up, to please get off the horns of that dilemma. Will he tell us how it is that a Bill is necessary other than to go outwith the terms of the 1984 Act?
4.5 p.m.
Lord Teviot: My Lords, when I first saw this Bill referred to on the Order Paper, I thought that I really must try to support the Government on what is a public transport matter, especially as I fully supported the need for the original London Regional Transport Bill. I congratulate the new London Regional Transport organisation on the way that it is proceeding. Through its efforts the ratepayers of
1112
London and those of us who visit London will benefit, and, indeed, are already benefiting.
One absolutely deplored the conditions under which the professional executive had to operate under the control of the GLC in the last nine months of its reign. The board had a majority with people who propounded their doctrinal political views. Changes had to be made, and changes have happened. Fares have increased in some areas, but the increases have been not swingeing but practical.
Having said that, one cannot but feel that this Bill appears thuggish. Necessary it may be, but one may have preferred the Government to obtain the money through Section 49 and, if necessary, gone back through the courts. But time is of the essence here. Everyone needs certainty, and needs it quickly. London Regional Transport needs grant aid. It is nonsensical for it to have to borrow at expensive rates of interest. The full judicial processes, which my noble friend Lord Boyd-Carpenter has mentioned, could well extend into the next financial year and could present problems. Certainty has a price and it might be considered preferable to pay it.
I must turn to another area of this Bill about which I am not terribly happy. The premise that it is essential to secure from the GLC this money, which was earmarked for the capital's transport, and not spend it elsewhere simply does not hold water. There, I am afraid, I differ from my noble friend. Over the years London Transport Executive, and, I suppose, before it the board, received subsidy only when it needed it. There is no doubt about that. There is probably a very good case that London Regional Transport needs this money now. One can argue, "Who are the GLC to say now what LRT needs? It is divorced from them"—though I concede that the GLC are fully entitled to express their views and contest the matter.
This Bill has given cause for embarrassment to loyal supporters, especially those who belong to the minority on the GLC and who have a great deal on their plate at the moment. There is a great deal more one could say about the merits or demerits of this Bill and about its background.
I must turn to the amendment which has been proposed by the noble Lord, Lord Tordoff. It states:
"whilst this House regrets the retrospective nature of this legislation".
I am afraid that I cannot agree that this legislation is retrospective—although I respect the arguments that he has produced—for the following reasons. The amount of money paid by LRT under the Bill was required for 1984–85 under the GLC and will be paid this year, though there are only so many days in which to do it. The GLC's position is not adversely affected at a time when they can do nothing about it. If this Bill had been introduced in 1985–86, that would have been retrospective and would have been wrong. I do not feel that a change of this kind, however unfortunate, can properly be described as retrospective. Since the Bill was first published on 1st December 1983, the GLC have known of the theoretical maximum amount which could be the subject of a direction.
It is for those reasons that I am afraid that I cannot support the noble Lord in the Division Lobby—or, at the moment, I cannot support him. One should always

1113
keep one's options open. There are more speeches to which I have to listen. However, I am most unhappy about the Bill. I join with the noble Lord and his supporters in their protest. It is only left for me to say that I wish London Regional Transport the very best in its endeavours. It has made a very good start. I hope that this type of legislation never finds its way into Parliament again.
4.10 p.m.
Lord Diamond: My Lords, I warmly support the last sentence of the noble Lord, Lord Teviot. I want to put before your Lordships two simple propositions. The first is that this Bill is clearly retrospective. The second is that we should say so. I hope that I do not need to delay your Lordships' House by explaining how abhorrent is retrospective legislation. It is a denial of personal liberty. It is an affront to natural justice. I cannot think of cases, even though my noble ally has imagined them, where we are justified in saying to an individual or a body, "You acted lawfully, but we are going to decide that what you did lawfully shall now be deemed unlawful." That is the effect of retrospective legislation.
Why do I say that this Bill is retrospective?—simply because the Bill says so. I did not invent it, and we do not take sides on the matter here. We are concerned with the principle of retrospection. The Bill says that an amount shall he paid in respect of the year starting 1st April 1984. I do not know why anyone wants to dispute the fact that 1st April 1984 is past; it has gone. I say particularly to the noble Lord, Lord Teviot, that by the time the Bill receives Royal Assent—not the time it was introduced—the date of the 1st April 1984 will be roughly 12 months past. None of us can know the precise date on which it will receive Royal Assent. I do not know. The noble Lord, Lord Boyd-Carpenter, does not know, although he made an assertion on the assumption that it would be passed in this financial year. I am a simple kind of chap who understands that something that is 12 months past has gone and that legislation referring to it must be called retrospective.
The amount which is in dispute and which forms part of the argument concerning retrospection is approximately £50 million. That is the sum being transferred, in effect, from the ratepayers of London to the taxpayers of the United Kingdom. However cross may be the Government and some of their supporters with the electors of Greater London for having returned the kind of council that they do not like, I beg of them not to give vent to their antipathy towards individuals and the make-up of that council by attempting to pass a law that is a flagrant injustice to them. Whether or not they should be treated justly is not a matter for us. The elections have taken place. A council has been duly elected in accordance with our democratic principles. It has certain powers.
Any accountant looking at accounts he is preparing for a business for a year would say of the £50 million, "These are reserves, future leasing costs, future redundancy costs—the reserves which a wise board provides for." However, as all of us know, there are two kinds of reserves which a wise board provides for. There are reserves in respect of expenditure incurred, which must be so stated, and there are reserves which
1114
you can put on one side because you know that in future you have to meet that liability. You can reserve for that second category. You are required by law to show it separately because it is not set against current expenditure. It will be set against future expenditure when it is incurred.
That is what the £50 million is. It is not money which the recipient body, London Regional Transport, needs to fulfil its current requirements. That was the manner in which the Secretary of State said that he would decide on the amount involved, at the time the original Bill was being explained in another place. There is nothing in the amount that varies the principle that I have enunciated previously—the astonishing Diamond principle that anything referring to 1st April 1984 is past.
Before dealing with the second simple proposition, I should perhaps offer a comment on how this difficulty arose. It might affect the attitude of some of your Lordships towards the vote which I hope very much will take place on what is an important principle. Your Lordships' House is here to defend principles. It is not here necessarily to argue about the details of money. It is here to defend important principles—principles of the liberty of the subject. This is the case whether the subject is someone who is affected by Parliament, for which reason we prevent Parliament renewing itself endlessly, or whether the subject is a ratepayer in London who has exercised his democratic right to elect representatives who have made a certain decision. How did this matter arise? It arose, as we now know, because the judge has said so, from what I might call "the Cheltenham characteristic". It arose through a no-consultation "cock-up". Once more there was the avoidance of consultation. Therefore, the Secretary of State did not know all the figures, because he had not found out and had not consulted. I do not think that this should prevent us doing our duty.
I now turn to the second proposition—that having decided that the Bill is retrospective, we should say so. The Bill has been certified as a Money Bill. Why is it so certified?—because the Government of the day asked the Speaker to certify it. The initiative rests with the Government. Once it is certified by Mr Speaker, that is the end of the matter so far as your Lordships' rights are concerned. It cannot be amended. We are not seeking to amend the Bill by one comma. I should like to refresh your Lordships' memory as to what is a Money Bill. I quote from the latest edition of the Companion to the Standing Orders, which states:
"A Money Bill is a Bill endorsed with the certificate of the Speaker, signed by him, that it is a Money Bill because in his opinion it contains only provisions dealing with national, but not local, taxation, public money".
National, but not local! This is a Bill which affects the rights of a large locality administered by a body called the Greater London Council, and so I can well imagine that those who advised Mr Speaker had to think twice before they recommended that he should certify it. But it has been so certified, and that is the end of the matter: we cannot therefore amend it.
However, we have got a month. We are entitled to one month in respect of this Bill. What are we supposed to do in that month? Are we supposed to admire the colour of the paper on which the Bill is printed? Of course not. We are supposed to use our

1115
heads. We are supposed to act as this House always feels itself entitled to act and to draw the attention of the Government, of the other place and of the country at large to the danger of an important principle of liberty being over-ridden by an unwitting Government. We are not arguing about the detail of money. I have referred to the £50 million only to describe what it is and to show that it is irrelevant to the issue of retrospection. Retrospection remains the key matter, and this House is entitled to express its view on retrospection.
I do not think that really there is anything more I need say to your Lordships. It is clearly retrospective. We are given a month in which to make up our minds whether it is retrospective. We have put on the Order Paper a form of words which does not alter the Bill by one comma and does not delay it by one second but gives your Lordships' House the opportunity to say, "We are, in the last resort, the defenders of the liberty of this country, and we shall say so".

Northern Ireland: Terrorist Killings
4.22 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Northern Ireland. The Statement is as follows:
"I shall with permission, Mr. Speaker, make a Statement on last Thursday's attack by the Provisional IRA on Newry police station and on later incidents in which two members of the security forces died.
"At about 6.40 on the evening of 28th February, nine mortars were fired at Newry police station from a lorry parked about 200 metres away. The lorry had earlier been stolen near Crossmaglen. Seven mortars exploded. One of these hit the prefabricated canteen at the back of the police station. Three exploded at the front of the police station, two more exploded on derelict property opposite, and the seventh exploded in the garden of the rear of this property. The two mortars which did not explode landed in a street near the police station.
"Nine police officers, including two police-women, were killed. Seven other officers were taken to hospital, one of whom is still detained, and 23 civilians also received treatment.
"Later that evening, at about 10.30, a device beside a telegraph pole in Pomeroy, County Tyrone, exploded as a UDR foot patrol passed. One soldier, a part-time private in the regiment, was killed, and another soldier was injured.
"Yesterday morning outside St. Gabriel's Roman Catholic church in Enniskillen two terrorists shot dead an off-duty RUC officer in front of his wife and children. The terrorists escaped in a stolen car towards the border, and abandoned the vehicle at Belcoo.
"The Provisional IRA has claimed responsibility for all these brutal murders.
1116
"I reviewed security arrangements with the Deputy Chief Constable and the GOC on Friday, and these are now being urgently re-examined. So far as the attack at Newry is concerned, no building can be made impregnable and the risks faced by the security forces in Northern Ireland are well understood. I have already approved a capital expenditure programme for police building of between £20 and £25 million in the next three years, including a new police station in Newry. We shall now look carefully and urgently at possible further physical measures for the protection of buildings and at all the procedures designed to forestall attacks of this kind.
"These attacks on Protestant and Catholic members of the security forces show once again the callous savagery of the terrorists. I know the whole House will wish to join me in expressing our deepest sympathy to the families of the dead and injured and our appreciation of the courage and steadiness of the security forces. I believe this House will want to send out another message: we must not and will not bow to terrorists—they will not win".
My Lords, that concludes the Statement.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Lord for repeating the Statement, and we join with him in offering our profound sympathy to the families and friends of the nine men and women killed last Thursday by the attack on Newry police station, as well as the relatives of the others who have been killed over the last two or three weeks. Words are inadequate to convey our horror and revulsion at this wicked deed, which is reported as being one of the worst attacks since the beginning of the present troubles in Northern Ireland 16 years ago. Sadly, it reflects a worsening of the violence in the Province during the last 14 days. Last year it seemed that the violence was abating, and it is disappointing to find that this is not the case.
I am sure the noble Lord agrees that there are no simple solutions, but the supporters of terrorism must not think that an escalation of violence is a solution. It is totally counter-productive. I should like to say also that we appreciate very much Dr. Garret FitzGerald's absolute condemnation of this wicked act. Further-more, I hope it will not be thought that as a result of this act the political situation in Northern Ireland has reached an impasse and that further initiatives should not be taken, even though the talks between the SDLP and the two main Unionist parties have broken down, mainly as a result of Mr. Hume's agreement to meet the IRA.
We noted that the right honourable gentleman the Secretary of State for Northern Ireland said after the Newry attack that although political progress is important—I quote him:
"it shrinks into insignificance when compared with the job of getting rid of terrorism".
Of course it is absolutely essential that the defeat of terrorism should be a key priority of any government, but will the noble Lord give an assurance that this will not be at the expense of seeking a political solution? Is it not true that striving for a political solution is in fact part of the remedy against terrorism itself?

1117
Will the noble Lord also assure the House that the Government, with the Government of Eire, will carefully consider new security initiatives on both sides of the border, on the grounds that these are essential if the safety of both the Catholic and Protestant communities of Northern Ireland, and of that area below the border, are to be secured?
Finally, can the noble Lord elaborate on the measures to be taken to protect the RUC stations in Ulster from this type of attack in the future? It is, I think, a matter of comment that the armaments used by the IRA were in fact heavy armaments; and it is further a matter of comment that they can be trundled about so easily without the security forces of either side being in touch with them or knowing about them. I hope that this matter will be investigated very carefully by Her Majesty's Government in concert with the Government of Eire.
The Statement rightly says that,
"no building can be made impregnable".
But the point is clear, and is made in the Statement, that these were in fact prefabricated buildings and therefore were particularly vulnerable to attack. I wonder whether the noble Lord, when he replies, can tell us what is the total amount now spent by the Government on security in Northern Ireland.
Lord Hampton: My Lords, I, too, should like to thank the noble Lord the Minister for repeating this Statement. The Statement covers a new sequence of evil and utterly pointless atrocities. I accept that it is virtually impossible to make police stations 100 per cent. safe; but we are glad that the position is being reviewed as a matter of urgency.
We are told that nine mortars were fired at Newry police station from a lorry parked about 200 metres away. The lorry had earlier been stolen from near Crossmaglen. I should like to ask the Minister two questions about that. First, how much earlier had the lorry been stolen? Secondly, could it not and should it not have been tracked down before the mortars could be launched? The other outrages run true to form for the IRA. They seem to take vile pleasure in gunning down officers in front of their wives and children, and very often in the act of attending worship. There are no other questions that I wish to ask.
We on these Benches applaud the immense courage and devotion to duty of the security forces serving in the Province and we send our deepest sympathy to the injured and the bereaved, and the promise that we shall do all we can in the fight for a better, safer life for all in Northern Ireland. We wholeheartedly support the closing message from the Secretary of State:
"We must not and will not bow to terrorists—they will not win".
Lord Lyell: My Lords, may I begin by thanking the noble Lords, Lord Cledwyn and Lord Hampton, for the words that they have expressed about the bereaved and the injured? I shall certainly ensure that their good wishes and their tributes to the security forces, and above all to the brave men and women of the Royal Ulster Constabulary, are passed on. I am most grateful for them.
1118
The noble Lord, Lord Cledwyn, noted that the Taoiseach had issued a very forceful statement. We too are very grateful for Dr. FitzGerald's forthright support. Your Lordships will know that we all regard the fight against terrorism in Ireland and elsewhere as being of paramount importance. However, we appreciate Dr. FitzGerald's comments and the forthright statement that he issued.
The noble Lord, Lord Cledwyn, also raised the question of a twin-track: of trying to achieve a political solution as well as combating terrorism. I understand that yesterday, in the course of an interview on the television programme, "Face the Press", my right honourable friend said that he was all in favour of political progress. One aspect of that is the discussions that we are having with the Irish Government, which I hope will succeed. I think that it is a twin-track, and if we can reach agreement over such an arrangement with the Irish, then that would be helpful. I do not think that it is a substitute for political progress within Northern Ireland. I am doing my best, and shall continue to do my best, to bring about such political progress. However, my right honourable friend was quite correct when in Newry—and this weekend in the light of the later events—he stressed that our one aim is to defeat the terrorists.
The noble Lord also asked whether there were any further points about which I could help regarding joint security between ourselves and the Republic. I am able to say that these relationships are very strong. I know that at the moment the security forces are reviewing whether anything could have been done. However, I am sure that both the noble Lord and the House will accept that any discussions of details, or any lessons that have been learned as a result of the tragic events of last week and the weekend, will be put into effect as soon as possible, but of course they should remain confidential.
The noble Lord, Lord Cledwyn, also asked about measures for ensuring the safety of the security forces. The noble Lord referred to the Portakabin prefabricated buildings. I alluded to that in my opening Statement and mentioned that my right honourable friend has funds of between £20 million and £25 million for a further capital programme to improve RUC stations. It would be invidious of me to single out any particular improvements. I stressed that there would be a new, improved police station at Newry. However, as regards any reinforcement of roofs and suchlike of the Portakabins or covering the roof of the station with a layer of concrete, other liabilities may be involved, as we have found in the past at Ballykelly and more recently at the Abbeystead explosion in Lancashire, where very serious problems were encountered in rescuing the injured among concrete which had collapsed as a result of a very powerful explosion. However, we shall certainly take on board any lessons that we can learn from this.
The noble Lord, Lord Cledwyn, also raised the question of expenditure on security. I am afraid that I am unable to give the noble Lord or your Lordships any meaningful figure of expenditure involving the Royal Ulster Constabulary and all kinds of operations; but I can tell the noble Lord that an extra amount of £3.1 million has been made available in 1984–85 to meet the cost of the force's expansion and, indeed, the

1119
increase in man-hours. I understand that for 1985–86 the increase will be in the region of £7 million. However. I hasten to add that that is an approximation. I hope that I have covered all the points raised by the noble Lord, Lord Cledwyn.
The noble Lord, Lord Hampton, asked me two questions about the lorry which was hijacked. I understand that the lorry was hijacked near Crossmaglen at about one o'clock, lunchtime, on Thursday. The driver was held until 30 minutes after the bombing took place. I understand that he was released at about 7 p.m. Therefore, there was no way in which he could have reported the incident or in which the incident could have been averted by speedier action over the loss of this particular lorry.
The noble Lord also raised the point as to how the lorry came to be parked there. I understand that this falls within part of the operational procedures in and around Newry and that this particular aspect of the tragedy is being examined. Certainly any lessons that are learnt will be digested.
4.38 p.m.
Lord Somers: My Lords, the whole country is horrified at the absolutely wanton and meaningless slaughter which is indulged in by the IRA. Can the noble Lord say whether the Government have any intention of reconsidering their decision about introducing capital punishment for the authors of such crimes?
Lord Lyell: My Lords, we do not have any plans to reconsider any measures of capital punishment. Indeed, in July 1983 both your Lordships' House and another place rejected a proposal to reintroduce capital punishment—and, above all, for acts of terrorism. I believe that it would be the opinion of your Lordships that, despite this particular series of atrocities which I have had the misfortune to announce today, the position has not changed since then. Indeed, we believe that the effects of such a step would in the long-term prove counter-productive by making it much more difficult to bring terrorists to justice, and that would strengthen their support and certainly destabilise society in the Province.
Lord Blease: My Lords, as my home and family are in Northern Ireland I should like to be associated with today's Statement and particularly with the comments and the remarks on the Statement made by my noble friend on the Opposition Front Bench. Because of the tragic sorrowing and suffering with which it deals, the Statement is an important matter for the people of Northern Ireland and for all Irish people—for Irish people in Northern Ireland, for Irish people in the Republic, for the Irish in Britain and for the Irish overseas.
I should have liked to hear a much more vigorous and more thought-out Statement. I hope that the remarks made by my noble friend on the Opposition Front Bench will not go unheeded and perhaps to some degree they will supplement the Government's Statement. The Statement has arisen out of death and destruction. It deals with shattered lives and shattered homes. It deals, sadly, with shattered hopes—the
1120
shattered hopes of children and our children's children in Northern Ireland—brought about by the brutal crimes of terrorist murder.
It has been said that over the past 16 years, after the evil deeds which have been committed in Northern Ireland, we have perhaps run out of suitable words to express our deep sense of revulsion and condemnation of these fiendish acts. Nevertheless, having said that, the importance of this Statement today is that it should have been made by the Government and that it should be supported and acted upon. The message should go out from this Parliament of wholehearted support for the men and women of the Royal Ulster Constabulary and for the other security services who are in the frontline seeking earnestly, under great difficulties, to uphold the accepted principles of justice, peace, and law and order.
We would all hope that the expressions of sympathy from the Government and from this side of the House, made here today, may bring some comfort to those who have recently and so tragically been bereaved, in that they may know that we share in some little measure at least their terrible sorrow and grief at this time. I would hasten to add, in view of some remarks which have already been made, that this House should appeal to the people of Northern Ireland not to allow their understandable upsurge of emotion to overspill into actions of retaliation, revenge or hatred.
The Government propose to carry out a number of security measures. With regard to those security discussions, which I can understand have to be in confidence and have to be guarded for obvious reasons, I feel that, nevertheless, it is in the interests of the morale of the RUC and other security forces that the representatives of the men be brought fully into consultation, and that they should be aware of what is being done in their name.
Finally, may I say that in this House today we should underpin and reinforce the determination of this Parliament to take urgent and forthright decisions to ensure that the evils of terrorism, which the Minister has already mentioned and which have been mentioned from our Front Bench, should not succeed. If we do so, I believe that these recent murders and other which have gone before, and the sufferings of the loved ones of the victims, will not have been in vain.
Lord Lyell: My Lords, we are grateful for the forthright, excellent and kind support from the noble Lord, Lord Blease, who of course has contributed so much to life in Northern Ireland and still contributes so much. So far as concerns the noble Lord's comment on this apalling tragedy reflecting upon everybody in Northern Ireland, and indeed on everyone in Ireland, perhaps I could draw your Lordships' attention to the opening paragraph of a statement issued by Dr. FitzGerald on the evening of the Newry atrocity. He said:
"Once again the IRA, in pursuit of their policy of seeking to provoke repression of the minority in Northern Ireland, have engaged in the mass murder of fellow Irishmen".
That, coming from the Taoiseach, is an expression of the feeling of abhorrence and shock felt by everybody in the island of Ireland. We in this Government are particularly grateful for that forthright support from the Taoiseach.

1121
The noble Lord raised a particular point about the consultations between the members of the security forces, and indeed the representatives of the security forces, and the Government. We shall certainly make sure that so far as is possible what is discussed at these consultations is made known, but of course this is a matter for the chief constable, or indeed the general officer commanding, as to the scope of the discussions between the Government and the security forces on security policy. It is a matter for them; and, of course, there is a great deal of operational policy as well, and I hope that the noble Lord will accept that.
Lord Fitt: My Lords, in view of the ruthless and relentless campaign of savagery that we have seen carried out by the IRA over this past fortnight, is it not time to say that a new atmosphere must be created? Over these past 14 days the IRA have murdered civilians and members of the security forces, both Catholic and Protestant, and they have carried on a campaign of murdering on the doorsteps of their places of worship, of their chapels, members of the judiciary, the RUC and the prison service. These murders have been carried out on the doorsteps of their own churches and chapels as they have gone to, or come from, mass. Would this not indicate that there is a new element of savagery entering into the activities of the IRA?
In view of this, and particularly when one recalls the howls of protest which emanated after three IRA men were killed in Strabane, would it not be right to pose the question, as I have done this weekend: if the security forces had apprehended that lorry, loaded with its mortar shells, two minutes before they unleashed them at the RUC station, would there not have been a howl of protest from Cardinal O'Fiaich, Peter Barry of the Irish Republic, and leaders of the minority population in Northern Ireland?
Is it not right that we should now say to the religious and political leaders of the minority in Northern Ireland that they, by these protests, and by their arguments and protests against the RUC and the UDR, however justified they may think their attitude is, are creating the conditions and the atmosphere in which the IRA can then engage in their murderous savagery? Is it not time that the Catholic minority population, of which I was one for 57 years until I left it last year, should now stand back and say, "We will withdraw our reservations against the security forces and assist them in every possible way to eradicate this terrorism from our land"?
Lord Lyell: My Lords, the whole House, and people far outside your Lordships' House, will appreciate the comments made by the noble Lord, who, after all, has such experience of facing up to this problem of the appalling violence and terrorism himself. For my part—and, indeed, I am sure on behalf of all your Lordships—I salute his courage over many years. His comments over the weekend are all the more valuable for his experiences.
I appreciate the appalling atrocities which have been carried out at the cathedral at Armagh since I was there this year. I went right round the cathedral and stood on the steps where the principal officer was
1122
murdered. I have not been to St. Gabriel's at Enniskillen, but I have a personal feeling for what the noble Lord points out.
The noble Lord raised the question of the lorry loaded with the mortar shells. He raised it over the weekend. His comments were particularly welcome and very relevant, and perhaps caused people to search their consciences. He will note that strong comment and condemnation was made in similar vein in the Irish newspaper, the Irish Independent. For all I know they copied the noble Lord's wise words. Certainly nobody is better qualified to condemn this appalling treachery and butchery by terrorism than the noble Lord, and I am sure that everybody is grateful for his comments.

London Regional Transport (Amendment) Bill
4.49 p.m.
Second Reading debate resumed.
Lord Carmichael of Kelvingrove: My Lords, until the repetition of the sad Statement which we have just heard we were discussing the London Regional Transport (Amendment) Bill. It has been said by a number of noble Lords that the Bill has been made necessary because of the wrong directions given by the Secretary of State following the passage of the London Regional Transport Act 1984. The Act received Royal Assent on 26th June, and on 29th June, only three days later, the Secretary of State directed the GLC to pay London Transport £281.3 million. The GLC took the Secretary of State to court on this direction and Mr. Justice McNeill gave a judgment in January of this year which incorporated what must surely be one of the most severe reprimands any Secretary of State has ever received from the High Court. I will refrain from reading the actual words but they are extremely sharp and extremely to the point.
Most noble Lords have spoken about the retrospective nature of this legislation and I certainly agree with the noble Lord, Lord Diamond, when he says that there is no doubt that it is retrospective legislation and that we should say so. I know that all of us in the whole Palace of Westminster look on retrospective legislation with great suspicion. It is an offence to parliamentary democracy and should never be considered except in most special circumstances. I am sure that in this House there must be many noble and learned Lords who will be aware of the previous uses of retrospective legislation and of the instances where it is acceptable to Parliament as a whole. This is usually because the law, as it stood, perhaps had been quite happily interpreted and generally accepted for many years before a deeper examination of the wording revealed a flaw.
I remember, as a Member of a Committee many years ago, being told by the then Minister—who is now ennobled and sits in your Lordships' House—of an example (which, I think, fills the bill very well) of the type of retrospective legislation that I am thinking of. I understand—and I am relying on my memory, so I may recall incorrectly one or two of the titles—that the Wireless Telegraph Act under which the old ten

1123
shillings radio licence was paid came into the category of an Act which, although it had been working apparently well for over 20 years, was suddenly discovered to be flawed. A Bill was brought before Parliament to clear up this mistake. I understand that it met with general approval because the alternative, had there not been an amendment, would have been that the Post Office would have been required to pay hack ten shillings a year to all who could prove that they had paid their ten shillings over the previous 20 years. This was a very reasonable example where Parliament as a whole accepted that there had been a genuine mistake so that people had been paying the ten shillings believing that it was reasonable to do so.
But this is not the case with the Bill. The legislation which it seeks to bring in is not retrospective in form, as was the Act to which I referred. But it is retrospective in effect. With this amendment Bill, we are not tidying up some drafting error discovered by the courts; we are being asked retrospectively to make lawful what were unlawful administrative actions taken by the Secretary of State. Mr. Justice NcNeill found against the Secretary of State primarily on grounds of the Secretary of State's exercise of the law; first, in getting his facts wrong; secondly, in failing to take account of all the relevant facts; and, thirdly, in failing to consult the GLC.
The Secretary of State was not found against on the grounds of his interpretation of Section 49 of the London Regional Transport Act. The original intention of Section 49 of the LRT Act could still meet what was assumed during all the stages in another place to be the intention of the Secretary of State: that is, to provide London Regional Transport's operating needs in 1984–85. Both the Secretary of State and the Minister of State said frequently that no surplus in 1984–85 was intended to be produced by the Act. The Secretary of State could still issue a new, and this time lawful, direction after consultation with the GLC and provide (under the existing law and without the necessity of this amendment Bill) for London Regional Transport's operating needs in 1984–85. This would not harm the travelling public and would be in the best interests of the ratepayers.
But this is not enough for the Secretary of State. He wants to go well beyond the promises that he made many times in another place. He has so drafted the amendment Bill that he will be deliberately creating a surplus for London Regional Transport at the expense of the ratepayers of London. What is in dispute is a sum of about £50 million which, it is contended, is more than the operating needs of London Transport. One of the reasons why the ratepayers of London will then be defrauded, if this Bill is accepted and if there is actually a surplus, is that if there was a surplus carried forward by London Regional Transport it would mean that they would have £50 million of London ratepayers' money to offset costs and charges next year; whereas, if they merely had enough to carry them through this year with their operating costs and they had to raise £50 million next year, they would get under the Act only two-thirds of that from the GLC. Therefore the ratepayers of London will be that two-thirds (that is, about £16 million to £17 million) out of
1124
pocket if this £50 million is actually going to be a surplus.
The Secretary of State claims that the £50 million extra for which he is asking is made up of a number of elements which he believes he is quite entitled to ask the GLC to provide. For example, he deducts £20.8 million for the leasing reserves on buses. This has been dealt with by a number of noble Lords, including my noble friend Lord McIntosh of Haringey and the noble Lord, Lord Diamond, who is extremely well qualified to deal with this type of subject. It should be noted I think (and it was said frequently in another place) that on the question of leasing the Department of Transport urged and encouraged the Greater London Council to lease buses in 1983–84. So this is not something which some fancy accountants at London Transport themselves got up to; it was suggested and encouraged by the Department of Transport.
In any case, surely, in terms of the London Regional Transport operating needs in 1984–85, there is no need to establish a leasing reserve such as this. I understand that the leasing will not be fully realised until 1996; so that we are really jumping more than 10 years ahead with the reserves that have been put aside for leasing—which, surely, is well outwith the range of expenses and costs of running London Transport in 1984–85. The Secretary of State has also claimed that £30 million is needed to meet London Transport's accrued liabilities and that these include a provision of £21 million for future redundancy payments. Again, this could not be considered part of the needs for the year 1984–85, although in fact, one of the problems is that we have not been able to get any figures from the Secretary of State or from the Department of Transport as to what the redundancy level is likely to be and what costs will be involved in the redundancies.
There is no doubt that this sum of £50 million which is involved goes beyond what could be lawfully directed by the Secretary of State under the Act as currenty drafted. The actions of the Secretary of State and his statements during the debates in another place make it clear that London Regional Transport—and many of us were afraid of this during the passing of the principal Bill—is no longer accountable to any elected body. That is irrespective of whether London Regional Transport is doing a better job than the previous set-up—and I do not make any comment one way or the other. All I am saying is that there is no accountability now for London Transport. It was said, I think very cruelly, during one of the debates in the other place that had a measure such as this been brought before the GLC, there would have been open debate, all the figures would have been published in advance, the press would have been there, the Opposition would have access to all the figures and been able to discuss them fully, and of course all the arguments would have been available to the general public.
At present we do not know anything about the detailed calculations on which the leasing reserve is based. We do not know the full details of the redundancy and other sums that the Secretary of State referred to in another place. We do not even know whether it will be possible to have audited accounts and that the GLC will get money back, if all their subvention is not used in the year, as has always happened before. What happened before was that,

1125
although the GLC perhaps budgeted so much for London Transport, London Transport only got what they actually required, whether it was under the budget or, in some cases, over the budget.
The Bill is a poor reflection on the Government, and particularly on the Secretary of State. I agree wholeheartedly with the noble Lord, Lord Diamond, when he says that, irrespective of the statements that have been made about it being a Money Bill, it comes before us and we have to make some comment on it. The obvious comment we must make is that the Bill is retrospective. I agree with all those who have said that, it being retrospective, we should say quite clearly that it is.
5.2 p.m.
Lord Brabazon of Tara: My Lords, we have had a thorough and perceptive debate on the issues raised by this legislation. I have listened carefully to the contributions which have been made, and I shall try to respond on as many points as I can. But before I do, I should just like to stress once again the main points of principle which lie behind this Bill.
I set aside the point about the £10.2 million paid by the GLC to LRT before 29th June and the £12.9 million reduction in the GLC's Money Act, because these sums are no longer at issue. As I explained in my opening speech, we have conceded this money to the GLC, and LRT will have to absorb the consequent loss of grant. The sums at issue are the £20.8 million leasing reserve and the expected £30 million cash surplus for 1984–85; some £50 million in all. The principle at issue is whether the GLC should be required to fund LRT's liabilities and leasing commitments for 1984–85 or whether any money which is surplus to LRT's strict cash requirements for the year should be refunded to the GLC.
Let us consider first the cash surplus of £30 million. This extra money has been generated by LRT since 29th June, when the GLC lost control. In part, it is extra money paid by passengers, attributable to increased tourism and buoyant sales of Travelcards. Seen from another angle, it is grant which ratepayers have contributed for 1984–85 through the GLC's precept, with a contribution from taxpayers in the form of transport supplementary grant. Either way, it is certainly not the GLC's money.
The question is: should the GLC retain the money which it has raised from ratepayers to spend as it wishes, or should it pay the money to LRT? If the money is paid to LRT, as required under this Bill, it will be set against the liabilities which LRT has accrued and which would otherwise fall as costs on passengers and ratepayers in future years. I said in my opening speech, and I shall repeat now, that there is no question of the Exchequer benefiting in any way at the expense of ratepayers or passengers.
The GLC may nevertheless object to the principle of providing for liabilities. There are three things to be said about that. First, we are not dealing with a normal year, in which the GLC could adjust its grant payments to London Transport as between one year and the next, and might choose not to make provision for liabilities until they actually fell due for payment. We are dealing with a situation in which responsibility for financing LRT is being transferred from the GLC
1126
to the Government; and it is right, and in the interests of passengers and ratepayers, that there should be a fair settling of accounts at the end of this financial year.
The second point is that it is normal commercial accounting practice to make provision for liabilities. LRT themselves have done so in previous years. The third point is that a substantial part of the liabilities—£21 million—is for voluntary redundancy payments, which arise as a direct result of the efforts of LRT's management to bring forward cost savings. I ask your Lordships: would it be reasonable for the GLC to receive a rebate of grant payments, partly because LRT have made cost savings, and yet not be held responsible for any part of the transitional costs which flow with those savings? I put it to your Lordships that that would be quite unreasonable.
I now turn to the question of the leasing reserve. As I have said, the GLC habitually financed London Transport's capital programme by means of grant. This year, uniquely, the GLC decided that a substantial proportion of the capital programme should be financed by leasing. The £27 million worth of assets which were leased are principally new buses; they are an important, indeed essential part of LRT's capital investment requirements for this year. Instead of paying for these buses with grant, as it was accustomed to do, the GLC attempted to frustrate the system of controls on its overall capital programme by deciding upon leasing after its capital allocation had been fixed on the assumption that LT's capital programme would he grant-funded. Indeed, the GLC sought to evade paying for this part of the capital programme altogether, since the whole cost of the leasing deals—apart from the first year's payment—would be landed on LRT, after the GLC had lost responsibility for it.
Lord Diamond: My Lords, would the noble Lord give way? Is he suggesting to the House that, because the GLC has acted in a way which he or the Government do not like, that justifies the Government bringing in retrospective legislation?
Lord Brabazon of Tara: My Lords, I shall come to the question of retrospective legislation in a moment, but I am just suggesting that it is odd that the GLC, in their last year, should suddenly do something which they had not done before and should try to get round the capital programme which they had had imposed upon them.
Lord Carmichael of Kelvingrove: My Lords, may I ask the Minister whether he can confirm or deny that the Department of Transport actually urged the GLC in 1983–84 to start leasing buses? Perhaps the noble Lord would write to me.
Lord Brabazon of Tara: My Lords, I may have to write to the noble Lord on that point. My understanding is that they did in 1983–84, but that in 1984–85 they made it very clear that the GLC should not go outside its capital budget. However, I shall write to the noble Lord.
The Government quite reasonably take the view that the GLC should not be allowed to evade its normal responsibilities and saddle LRT with debts in

1127
this way. Ministers have made this clear all along. They said in terms that the GLC would be expected to cover the cost of the leasing commitments when what is now Section 49 of the LRT Act was being considered in another place. Subsequently, the courts ruled that the direction made under Section 49 should not have included the leasing reserve. It is clear that the Act, as interpreted by the courts, did not properly reflect the Government's intentions, as expressed to Parliament. But that in no way affects the argument about whether it is right in principle that the GLC should cover the leasing commitments. The amount provided in this Bill for setting up a reserve to help pay for the leases is no more than Ministers have given notice all along that they would expect the GLC to provide. So there is nothing unexpected in the requirement.
The noble Lord, Lord McIntosh, asked why the Bill was necessary at all, instead of our making a legal demand. I made clear in my opening speech that the courts took a different view of the way in which the powers of Section 49 should be exercised than that which the Government intended when they brought the legislation before Parliament in the first place and explained it to Parliament. I have explained the arguments as to why the leasing reserve and the cash surplus are needed by LRT, and why the demand on the GLC is reasonable. The noble Lord was wrong to suggest that there is a dilemma about the Bill. There is no dilemma. It is clearly right that the GLC should not leave LRT with unfunded liabilities—
Lord McIntosh of Haringey: My Lords, since the noble Lord has referred to the judgment, I wonder whether he will confirm or deny that Mr. Justice McNeill said specifically, in so many words, that the department's officials seemed more concerned with creating a surplus in 1984–85 to be carried forward, to enable much smaller revenue to be required in 1985–86, than with a careful appraisal of all the relevant facts. Does that not give the lie to the Minister's claim that this is a matter of providing for liabilities?
Lord Brabazon of Tara: My Lords, I do not see how the noble Lord can argue that, if the GLC makes a surplus of £30 million on the one hand and has liabilities of £37 million on the other, it is not going to be £7 million worse off. However, various noble Lords have argued that the Bill effectively taxes ratepayers, because any cash surplus carried forward to 1985–86 will go to reduce the Exchequer contribution for 1985–86 under the one-third/two-thirds split, as specified in the Act. As I have said, there is really no substance in the claim that this Bill effectively taxes ratepayers to the benefit of the Exchequer. First, we did not simply fix the Exchequer contribution to LRT's grant for 1985–86 at one-third of the total. The Exchequer contribution was fixed at £111 million, which is more than one-third of the total grants of £323 million. The Exchequer contribution was derived using the same principles as are applied to the calculation of Exchequer grant towards the cost of local authority services generally on the basis of LRT's projected public support requirement for 1985–86. It was set at the maximum level that would be fair to ratepayers in London and elsewhere, since the amount
1128
of Exchequer grant set aside for LRT affected the amount available for distribution to local authorities in London and elsewhere.
There is therefore no question of the Exchequer contribution having been reduced on account of any cash surplus which LRT may have for 1984–85. On the contrary, the Exchequer contribution is £35 million higher than it was in 1984–85 on a pro rata apportionment of the grants which the GLC received. If there were insufficient funds available to meet LRT's cash requirement and liabilities for 1984–85, there could be no question of increasing the Exchequer contribution for 1985–86. Any additional costs would fall on passengers or ratepayers in future years, though the ratepayers' contribution for next year has now, of course, been fixed. So the fact that refunds will be available under this Bill to meet LRT's liabilities is wholly to the benefit of ratepayers and passengers. Furthermore, we should not just look at this question purely from the ratepayers' point of view. The additional cash which LRT has managed to generate has come largely from passengers, through increased sales of Travelcards and the 6th January fares increase. It is therefore right that passengers as well as ratepayers should benefit, and that is exactly what will happen, as I explained.
I now turn to the matter of retrospection, which was raised by all noble Lords but particularly by the noble Lords, Lord Diamond and Lord Tordoff, who claimed that because the Bill covered the whole of 1984–85 it was retrospective. It could equally be said that the original Section 49 direction, and indeed Section 49 of the London Regional Transport Act, were retrospective because they were brought in part-way through 1984–85, at the end of June, to deal with the financing of LRT for the whole of the financial year, starting on 1st April. This Bill in no way makes it lawful with retrospective effect to require the GLC to pay a certain amount of grant to LRT. It introduces a demand now, but that demand is consistent with what the GLC has been on notice all along that it might be expected to provide. This Bill will make no unforeseen demands on the GLC, nor does it seek to make lawful the original Section 49 direction which has been quashed by the courts.
In fact, the GLC's liability under this Bill will be £23 million less than it was under the original Section 49 direction. It is true that the courts ruled that Section 49 did not cover future liabilities in respect of leasing. As I have explained, the question of liabilities is the principal respect in which the court's interpretation of the statute differed from the Government's express intentions, and that is why new legislation is needed to clarify the law. But the GLC has had the clearest possible warning of the Government's intentions since before Section 49 was enacted, and the Bill now before us imposes no new liability which the GLC has not been given to expect. It will provide for the establishment of a reserve of £20·8 million towards the cost of the leases, which is the same figure as the GLC was led to expect at the outset.
In summing up, I acknowledge that this Bill has had controversial aspects. I said at the end of my opening speech, and I reaffirm now, that the Government did not lightly bring this legislation before Parliament. It was brought forward to ensure that the financial

1129
arrangements between the GLC and LRT for this financial year were settled, and settled satisfactorily, from the point of view of passengers and ratepayers. I hope that what I have said today will have convinced your Lordships that this Bill is indeed necessary and that it seeks to secure a reasonable outcome for all the parties affected. I therefore hope that we can put the controversy behind us. I ask for your Lordships' agreement that the Bill be now read a second time, and I urge your Lordships to reject the amendment standing in the name of the noble Lord, Lord Tordoff.
5.16 p.m.
Lord Tordoff: My Lords, I shall be very brief, but I should just like to deal with one point which was raised by the noble Lord, Lord Boyd-Carpenter, since he suggested that I have in some way acted improperly in putting down this amendment to a Money Bill. Were it that this amendment detailed some item within the Bill, were it to attempt to change the sums in the Bill or to alter it in any other way, then I would understand what he has said. Were I to put down an amendment at Committee stage, which any noble Lord would be entitled to do because a reading of the Companion shows that it is within the power of this House to move an amendment—indeed, amendments have been moved to Money Bills in the past and have, on very limited occasions, been accepted in another place—I would also understand. But that is not the point.
The point is that we have a choice here of allowing this Money Bill to go through on the nod, as it were, having had an interesting Second Reading debate, or we have the important duty, as my noble friend Lord Diamond said, of demonstrating not only to this Government but to future Governments that this House does not like retrospective legislation. It seems to me that that principle is by far the more important one, and therefore I feel no sense of impropriety in putting down this amendment. I only—
Lord Boyd-Carpenter: My Lords, will the noble Lord allow me to intervene?
Lord Tordoff: No, my Lords. I am sorry—
Lord Boyd-Carpenter: My Lords, the noble Lord referred to me. If the noble Lord has not the guts to give way—
Lord Tordoff: My Lords, I am replying to something that the noble Lord said, and I would rather get this over with now.
Lord Boyd-Carpenter: I am sorry, my Lords, but the noble Lord has referred to me. He has not the guts—
Lord Tordoff: My Lords, that is perhaps an unfortunate phrase. May I deal with the situation referred to by the noble Lord the Minister in relation to the new Bill? As I said earlier, what the new Bill does is retrospectively to remove a section from an Act that was brought into this House less than a year ago and to replace it by a single sum. That, to me, is a retrospective piece of legislation. I believe that noble
1130
Lords on all sides would wish to regret that. That is why I put down the amendment, and I ask for your Lordships' support.
5.18 p.m.
On Question, Whether the amendment to the Motion for Second Reading shall be agreed to?
Their Lordships divided: Contents, 91; Not-Contents, 110.

DIVISION NO. 1

CONTENTS

Allen of Abbeydale, L.

John-Mackie, L.

Amherst, E.

Kilmarnock, L. [Teller.]

Ardwick, L.

Kirkwood, L.

Attlee, E.

Leatherland, L.

Aylestone, L.

Llwelyn-Davies of Hastoe, B.

Banks, L.

Lloyd of Kilgerran, L.

Barnett, L.

Longford, E.

Beaumont of Whitley, L.

McIntosh of Haringey, L.

Bernstein, L.

McNair, L.

Beswick, L.

Mais, L.

Birk, B.

Mayhew, L.

Blease, L.

Melchett, L.

Bottomley, L.

Meston, L.

Brockway, L.

Mishcon, L.

Brooks of Tremorfa, L.

Molloy, L.

Burton of Coventry, B.

Molson, L.

Carmichael of Kelvingrove, L.

Morris of Kenwood, L.

Cledwyn of Penrhos, L.

Mulley, L.

David, B.

Murray of Epping Forest, L.

Davies of Leek, L.

Northfield, L.

Delacourt-Smith of Alteryn, B.

Ogmore, L.

Oram, L.

Denington, B.

Phillips, B.

Diamond, L.

Ponsonby of Shulbrede, L.

Elwyn-Jones, L.

Raglan, L.

Ennals, L.

Rathcreedan, L.

Evans of Claughton, L.

Ritchie of Dundee, L.

Falkender, B.

Seear, B.

Falkland, V.

Serota, B.

Fisher of Rednal, B.

Shepherd, L.

Foot, L.

Shinwell, L.

Gaitskell, B.

Simon, V.

Gallacher, L.

Stallard, L.

Gladwyn, L.

Stedman, B.

Graham of Edmonton, L.

Stewart of Fulham, L.

Grey, E.

Stoddart of Swindon, L.

Grimond, L.

Stone, L.

Hampton, L.

Strabolgi, L.

Hanworth, V.

Taylor of Blackburn, L.

Harris of Greenwich, L.

Taylor of Gryfe, L.

Hayter, L.

Tordoff, L. [Teller.]

Heycock, L.

Wallace of Coslany, L.

Houghton of Sowerby, L.

Wedderburn of Charlton, L.

Irving of Dartford, L.

Willis, L.

Jacques, L.

Wilson of Langside, L.

Jeger, B.

Wilson of Rievaulx, L.

NOT-CONTENTS

Ailesbury, M.

Buckinghamshire, E.

Airey of Abingdon, B.

Caithness, E.

Alexander of Tunis, E.

Cameron of Lochbroom, L.

Allerton, L.

Campbell of Alloway, L.

Atholl, D.

Campbell of Croy, L.

Auckland, L.

Carnegy of Lour, B.

Avon, E.

Cathcart, E.

Bauer, L.

Chelwood, L.

Belhaven and Stenton, L.

Coleraine, L.

Beloff, L.

Colwyn, L.

Belstead, L.

Constantine of Stanmore, L.

Bessborough, E.

Craigavon, V.

Blake, L.

Cross, V.

Boyd-Carpenter, L.

Cullen of Ashbourne, L.

Brabazon of Tara, L.

Davidson, V.

Bruce-Gardyne, L.

De Freyne, L.

1131

Denham, L. [Teller.]

Mersey, V.

Dilhorne, V.

Middleton, L.

Ellenborough, L.

Mottistone, L.

Elliot of Harwood, B.

Norfolk, D.

Elton, L.

Nugent of Guildford, L.

Faithfull, B.

Onslow, E.

Fortescue, E.

Orkney, E.

Fraser of Kilmorack, L.

Orr-Ewing, L.

Gainford, L.

Pender, L.

Glanusk, L.

Penrhyn, L.

Glenarthur, L.

Peyton of Yeovil, L.

Gowrie, E.

Quinton, L.

Gray, L.

Rankeillour, L.

Gridley, L.

Reigate, L.

Hailsham of Saint Marylebone, L.

Renton, L.

Rodney, L.

Halsbury, E.

Runciman of Doxford, V.

Hampden, V.

St. Davids, V.

Home of the Hirsel, L.

Sandford, L.

Hornsby-Smith, B.

Seebohm, L.

Hylton-Foster, B.

Skelmersdale, L.

Iddlesleigh, E.

Soames, L.

Kaberry of Adel, L.

Somers, L.

Kilmany, L.

Stamp, L.

Kimberley, E.

Strathspey, L.

Kinloss, Ly.

Sudeley, L.

Kinnaird, L.

Swinton, E. [Teller.]

Kitchener, E.

Terrington, L.

Lane-Fox, B.

Teviot, L.

Lauderdale, E.

Thomas of Swynnerton, L.

Lawrence, L.

Thorneycroft, L.

Long, V.

Trefgarne, L.

Lucas of Chilworth, L.

Trumpington, B.

Lyell, L.

Vickers, B.

McAlpine of Moffat, L.

Vivian, L.

McAlpine of West Green, L.

Ward of Witley, V.

Mancroft, L.

Westbury, L.

Margadale, L.

Whitelaw, V.

Marley, L.

Wilberforce, L.

Marsh, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.27 p.m.
On Question, Bill read a second time; Committee negatived.

Trustee Savings Banks Bill
The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie): My Lords, I beg to move that this Bill be now read a second time. This is a somewhat unusual Bill. Its purpose is to enable the trustee savings banks to complete their transition from their present unique and anomalous status to independent banking companies in the private sector.
The Bill will enable the trustee savings banks to put into effect the policy that they, rather than the Government but of course in consultation with us, have worked out for their future. The Bill has the full support of the TSBs, and I know that representatives of the TSBs will be very happy to discuss their plans with any noble Lord who wishes to do so. The Bill does, however, tell only part of the story of the TSB reorganisation, as it deals only with that part of the reorganisation which requires statutory authority. In some respects the Bill has some of the characteristics of a private Bill to reorganise a bank's business; in others, it addresses questions of public policy.
Many of your Lordships will be familiar with trustee savings banks and Members of this House have made
1132
a major contribution, to which I am delighted to pay tribute, to the trustee savings banks movement over the past 170 years. However, others may be less familiar with the TSBs. The history and organisation of the TSBs are complex, so perhaps I may refer noble Lords to the summary of relevant, information on the TSBs—their history, present organisation, and plans for the future—which is contained in the White Paper published on 18th December last year. I shall not take up time in covering in any detail the background material which the White Paper sets out. I should, however, set out very briefly myself how TSBs evolved and how their role has developed, because this is essential to an understanding of the Bill.
The origin of TSBs lies in the early nineteenth century in Scotland. Local community leaders organised savings banks in which the poorer classes could put their pennies at a time when the banks would accept only pounds. The savings banks were run by trustees—from the best motives but essentially in a spirit of nineteenth century paternalism. Unlike building societies, TSBs have no membership structure. Parliament has regulated them since 1817 through a succession of Trustee Savings Banks Acts, of which this will be the last.
For very many years, TSBs operated as an arm of national savings, providing basic savings facilities to their depositors and a source of cheap funds to government. By the 1960s, it was evident that demand for this traditional service was falling and the TSBs were in danger of withering away. Depositors expected a fuller banking service, and took their business elsewhere when they were unable to get it from TSBs. In 1973, the Page Committee on National Savings—to which I shall return—recommended that the TSBs should substantially widen the services they offered.
The TSB Act 1976 provided the wider powers and the framework for co-ordination through the central board which made the growth of the TSBs over the past decade possible. That Act did not, however, address the fundamental question which the Bill now seeks to resolve: namely, the future constitutional form of the trustee savings banks.
Because of the special circumstances in which the TSBs evolved, ownership of them has never been established. The Government have considered the legal position very carefully and we are satisfied that neither depositors, staff, trustees nor indeed the Government themselves own the TSBs. As the White Paper acknowledges, the Acts are silent on this point. In the Government's view—and this is shared by the trustees who are currently responsible for the TSBs—it is essential that the issue of ownership should be clearly established for the future. Organisations of this size and importance should be clearly accountable to their owners.
One option would be to follow the route suggested in the Page Report and make the TSBs mutual institutions. I must stress that at present they are not mutual institutions because they have no membership structure or other mutual constitution. It is of course true that mutual institutions such as building societies and some insurance companies play a very important part in the financial services sector.
But mutuality, as it is called, is not without problems. In particular, it is difficult to establish the

1133
accountability of management to individual members, and mutual institutions do not have the access to additional capital from the markets which companies enjoy. There have been very substantial changes in the financial market place since the late Sir Harry Page (who died on New Year's Eve) made his recommendation.
On the one hand, the importance of access to the capital markets is now surely much more evident than it was 10 years ago. On the other, the TSBs have developed a range of financial services and a degree of sophistication and centralisation that could not have been imagined in the early 1970s. As the chairman of the TSB Central Board points out in paragraph 5 of his letter to my right honourable friend the Chancellor of the Exchequer, published in the White Paper, the TSBs today are radically different to those of 10 years ago. Not even the critics of the reorganisation proposals have argued that the TSBs will have difficulty in holding their own in their new role.
The TSB Central Board and the Government have therefore decided another course, which we believe is more appropriate in present circumstances. The Bill will therefore vest the business of the existing TSBs and of the financial services companies which collectively make up the existing TSB Group into new companies which will be set up for that purpose under the Companies Acts. The Bill fully protects the rights and position of TSB employees. The new holding company, to be called Trustee Savings Banks Group plc, will then issue shares to the public and the successful subscribers will become the owners of the new group. The TSB Central Board, not the Government, will be responsible for this operation under the powers which the Bill confers. The central board has already made it clear that depositors and staff will be offered priority in the share issue. To quote Sir John Read, the TSBs are
"firmly set on the principle of wide ownership of our shares, with priority for our customers and staff".
Those words appear in paragraph 8, on page 13 of the White Paper.
The Bill does not attempt to set out in terms how the flotation itself is to be achieved; that is surely the TSB's business, and in any event it is necessary to leave a great deal of the detail to be decided by the experts at the time in the light of market conditions. But the Bill does provide the central board with such powers as may be necessary in this connection.
I should also draw your Lordships' attention to the fact that the memorandum and articles of association of TSB Group plc will contain provisions to safeguard the independence of the new company. Specifically, the memorandum will provide that no person may own more than 5 per cent. of TSB shares during the first five years of the new company; thereafter, the articles of association will restrict maximum shareholdings to 15 per cent. Drafts of these documents are in the Library.
The main object of the Bill is to enable the vesting operation which I have described to take place; that is, the reorganisation of the existing TSB Group into the new Companies Act structure. It will place the new TSBs in precisely the same position as their main
1134
clearing bank competitors—as commercial banking companies set up under the Companies Acts with access to the capital markets. The proceeds of the sale will be retained in the TSB Group. That is extremely important.
However, the Bill also achieves another important object. It abolishes the special restrictive supervision which the Treasury has exercised over TSBs for very many years. The new banking companies will be supervised by the Bank of England under the Banking Act 1979 in exactly the same way as are their competitors. This will simplify the banking supervision system.
Over the years, a great many references to TSBs have accumulated on the statute book. Most of these are incidental, but some are major—notably the Trustee Savings Banks Act 1981, which consolidated all earlier TSB legislation then extant into one statute. The Bill makes arrangements for the dismantling of the 1981 Act and the removal of other references from the statute book as soon as they become redundant. This operation will be technically complex, and will be achieved largely by statutory instrument under the Bill. The Bill also contains a number of tax provisions which are necessary in order to allow the TSBs the same tax treatment during the reorganisation as they would have enjoyed had the old TSB Group been a group of limited companies.
Clause 6 of the Bill deals with another nineteenth century foundation; the Scottish "1819" savings banks, of which there is now only one—the Airdrie Savings Bank. It enables this type of savings bank to apply for authorisation under the Banking Act 1979 by remedying an oversight in that Act.
I should be happy to answer specific points on the Bill at the end of the debate as well, of course, as in Committee—but for the moment I will not burden your Lordships with further technical details. Discussions in the other place and outside have concentrated on two key questions: whether the Companies Act approach is the right one, and whether the Bill should contain additional provisions to govern or restrict the conduct of the new TSB banking companies once they have been established.
These are the most important points. I have explained why the balance of argument in the mid-1980s, and looking forward into the next decade, favours the Companies Act approach over the mutual approach. I do not believe that it would be right for Parliament to continue to apply any special legal provisions to the TSBs, whether these are adverse or favourable in nature. It would not serve the interests of the TSBs, their staff or their customers, to single the TSBs out for special treatment, and to make the TSBs come back to Parliament when they need a change to the legal framework which applies to them.
Some people may be concerned that the change in the status of the TSBs will in some way diminish the quality of the service they provide and change the character of the organisation; that is natural when dealing with such a well-known and long-established institution handling something so personal as people's financial affairs. I do not believe that these fears are justified and I draw the attention of the House again to Sir John Read's letter in the White Paper, which

1135
provides reassurance on this point. The strength of any organisation, and most particularly of a bank, depends on the customer base which it exists to serve. As Sir John Read says in his letter to my right honourable friend:
"First and foremost, we intend to maintain our traditions as a personal bank, proud of our achievements in the communities which we were established to serve."
A change in constitution does not, however, imply a change in role or in the ability of the new banking companies to continue to provide the fullest possible customer service to their traditional customers. What these proposals do promise is security for the future in the sense that the TSBs will be placed on a basis where they can maintain and enhance their services in the 1990s and beyond. It is proper to recognise the enormous contribution that the trustee savings banks have made under their present constitution, and the Government are confident that the new constitution will enable them to continue to play a vital part in a financial market place which is likely to become even more different from that in which they passed their first 150 years. My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(The Earl of Gowrie.)
5.42 p.m.
Lord Stoddart of Swindon: My Lords, I should like to thank the noble Earl for his full and clear explanation of the Bill. Certainly the Bill is designed to end a series of changes in the trustee savings bank movement—changes which, in fact, began with the Page report and which led to the Act in 1976 which, as the noble Earl explained, radically changed the operations of the TSBs. These changes enabled the TSBs to expand their services and provide the conditions for a new dynamic in the movement which has been of great benefit to customers, staff and the world of banking itself.
The trustee savings bank movement has certainly had a long and distinguished history. It has been particularly strong in Scotland, where the movement began and, of course, in the north of England. As the noble Earl explained, the banks were established by local people whose main aim was to encourage thrift among poor people so that they would not become a burden on the public funds and also to assist people to obtain access to savings and the benefits that such savings could bring. Like so many other institutions in our society, the TSBs had small beginnings and modest aims, but they have developed into large organisations with great scope and ambition.
The changes since the first bank was set up in 1810 in Ruthwell, Dumfriesshire, have certainly been considerable. The TSBs now have about 6 million customers and 2 million credit card holders. The changes brought about by the 1976 Act have enabled the TSBs to provide full banking services, including making loans to depositors. In addition, TSBs have developed a range of services such as cheque, savings, and investment accounts, and fixed-term bonds. Insurance services are available and the TSB Unit Trust Company has proved highly successful since its formation. Mortgage facilities are available and there is, of course, the instalment and leasing company, United Dominions Trust Limited. The early founders
1136
of the movement would hardly have recognised in the modern TSBs the simple savings movement they had established; but I feel sure they would have only admiration for the present organisation which has developed to meet the needs of the times.
The Opposition accept that the further changes envisaged in the Bill do not amount to a privatisation measure; that is, in the sense of the British Telecommunications Act which was designed to sell off public assets for individual private gain and to bolster the Chancellor's policy of giving tax cuts to the well-heeled at the expense of the poor. There is no crock of gold here for the Chancellor to get his sticky fingers on. The Government do not own the trustee savings banks and, therefore, cannot benefit in a financial sense from this Bill. The money raised from the sale of shares will, as I understand it, be added to the existing reserves of about £600 million and be used for the further development of TSB services. Under these circumstances the Opposition will not oppose the Bill in principle, although amendments may be proposed during later stages to clarify and improve it.
Having said that, however, let me make it quite clear that we are not entirely happy with the route being taken to establish ownership of the TSBs. The public limited company route was not the only route possible. Indeed, the Opposition, while clearly recognising and understanding the developments in banking since the 1976 Act, nevertheless believe that mutualisation should have been given far better consideration than has been the case. The Page report rightly noted that the principle of mutuality operates in the vigourously competitive fields of building societies, insurance and some unit trusts. Further-more, the same report expressed the view that mutuality was highly suited to the needs of financial organisations such as trustee savings banks if they play a wider role in the provision of financial services. The report went on to say that there was no reason why the trustee savings banks, suitably reorganised, should not exist as mutual organisations primarily in the private sector of the economy.
Clearly, then, the mutualisation option was a real and relevant one. In fact, it was one that would introduce a third force into banking. With mutualisation there would be the clearing banks, Giro and the TSBs. As it is, with the TSBs reorganised as a PLC and likely to drift further towards the clearing banks, we shall have Giro and the clearing banks, and the option of a third force in banking is effectively closed.
I remain somewhat puzzled as to why the Government rejected the mutualisation option so firmly. After all, it is not opposed to their own oft-repeated philosophy of wider ownership. Indeed, mutualisation would achieve the widest possible ownership since the customers would be the owners and the sole beneficiaries of profits, either through direct bonuses or improvements in services at cheaper rates, or a combination of all those elements. One has to ask whether there has been any great pressure from account holders or the staff for conversion to a public limited company. If there has been, neither I nor anyone else has heard about it. The real pressure seems to have come from management who, for their own reasons, believe that better accountability will be

1137
achieved through the creation of shareholders, whoever they may be at any given point in time.
It is also true of course that the TSB wishes to raise new capital for further development and sees the PLC option as the best way of achieving that. One is bound, however, to say that there are alternative ways of raising capital for development, and indeed the TSB has itself already accumulated reserves of £600 million to date—a significant sum.
This brings me to the question of the possible takeover of the TSB by another bank or financial institution. It is of course true that Sir John Read in his letter to the Chancellor—which has already been quoted by the noble Earl—referred to protection against takeover. It might be as well to recall exactly what Sir John said. His letter is printed in the White Paper. He said:
"We have taken the view that it would not be right, given the history and traditions of the TSB, for the TSB Group to be unduly exposed to the risk of takeover, expecially in the early years following reorganisation. The draft memorandum of association of TSB Group plc therefore contains a provision that in the first five years following the issue no one may own more than 5 per cent. of its ordinary shares. The draft articles of association of the company provide that after this five year period has elapsed no one may own more than 15 per cent. of the shares. This arrangement will give the new Group a very fair degree of protection against takeover, particularly in the first five years".
At first glance the safeguards against takeover seem reasonable and effective, and for the first five years may very well be effective. But five years is a comparatively short period of time and after that it is proposed that no one may own more than 15 per cent. of the shares.
The first question that I should like to put to the noble Earl is: what is his definition of "no one"? It is a very loose definition indeed. Does it mean no single individual or a single company? Does it refer, more importantly, to each of the four joint stock banks; or does the 15 per cent. limit refer to all the joint stock banks as one for the purposes of shareholdings? If each of the four joint stock banks bought 15 per cent. of the total shareholding, they would among them hold 60 per cent. of the total shareholding and would therefore be in a controlling position in the one bank, the TSB PLC, which would be their major competitor. I should certainly like to have the noble Earl's comments on this aspect when he winds up.
Furthermore, the 15 per cent. limit will be safeguarded not by statute as we should prefer, but simply by the articles of association of TSB PLC. While it is true that articles of association cannot be amended at the drop of hat, they can be so amended at an extraordinary general meeting, and if a bid offer is made attractive enough to the existing shareholders, the requisite majority to amend the articles of association is always attainable. We must, after all, understand that in the last analysis shareholders are primarily concerned—and this is quite understandable—with their own personal interest and are unlikely to be persuaded against their own interest by abstruse arguments about the future control of the company. Therefore this is a matter with which we may very well wish to deal at the Committee stage.
We must not overlook either the possibility that TSB PLC might wish to take over another bank either
1138
in the United Kingdom or overseas. In so doing it may very well overstretch itself or get its fingers burnt through bad judgment. The TSB PLC will of course be subject to control in such operations by the Bank of England, but the record of the Bank of England so far does not inspire confidence that it will be able to prevent unwise ventures that may hurt the TSB PLC's customers and shareholders in varying degrees.
Perhaps I should now turn to the question of the position of existing depositors and staff in relation to shares. There is in the Bill no provision as to the date or the time limit for flotation after the assets have been transferred to TSB PLC, nor is there any reference to the allocation of shares. Therefore we do not know under what conditions the shares will be floated; nor do we have any indication of the proportion of shares that will be set aside for purchase by depositors and staff. We know that a great deal of interest has been aroused, since there was a significant increase in the number of accounts prior to the closing date of 17th December entitling depositors to a pink priority slip for the purchase of shares.
We also have an indication from TSB chairman, Sir John Read, of the number of depositors who would become shareholders in the new company. According to press reports Sir John has said:
"If we could get a 10 per cent. response, we would feel very encouraged".
I have to say that in my view and in that of the Opposition Sir John's target seems rather modest and we should be very disappointed if the takeup of shares by staff and depositors was not very much higher than 10 per cent. Do the Government agree with the assessment of Sir John Read, and, if so, do they not share our concern at the low level of expectation? We shall be interested in the noble Earl's reply, and in the light of that reply we may wish to return to the matter during later stages of the Bill, when we may also wish to raise the question of staff participation in the management of the new company.
I have one final point on flotation. Can the noble Earl make some statement about the sale of shares abroad? Is there to be a stipulation limiting the number of shares which can he held by foreign owned companies, so that control of the TSB PLC cannot fall under the control of foreigners? If there is to be such a stipulation, perhaps we can be given details? If not, perhaps we can he told why not.
I now turn to local involvement. We have all noted the assurance given by Sir John Read that the regional boards, which were set up on 1983 to take the place of the boards of trustees of the former TSBs, will be maintained to help to ensure a continuing close relationship between the TSB Group and local communities, and that assurance is to be welcomed. However, there is no statutory backing to this under-standing and therefore no certainty that at some future date all local involvement will cease, in which case the ethos of the Trustee Savings Bank movement will be entirely eradicated, and that would be unfortunate indeed.
We wish to see permanent involvement in local communities to help to ensure that services are maintained in what in strict commercial terms are less profitable areas of the country. It would be ironical

1139
indeed if areas in Scotland where the TSB movement began found themselves, as a result of this Bill, deprived of TSB service because the new board decided to concentrate its main thrust in the lucrative banking areas in the south of England. It would be useful to be assured that Scotland and the north of England will not be neglected and forgotten while TSB PLC concentrates all its efforts on forging ahead in southern England.
We would also hope that, as the new organisation builds up its commercial lending business, its ordinary private customers who have built up the total business of TSBs are not neglected and demoted to a second-class status. Of course it is well understood—and I appreciate it—that the existing management has no intention of doing any such things, but it is the future in five to 10 years that must give cause for concern.
As I have already said, we shall not oppose this Bill in principle, but I should have preferred a Bill that could have been welcomed wholeheartedly on all sides. During later stages we shall not obstruct the Bill in any way, but we reserve our right to come forward with amendments to write into it safeguards which we think necessary for the protection of depositors and staff and for the continued strength of the TSB movement.
6.1 p.m.
Lord Banks: My Lords, I should like to join in thanking the noble Earl, Lord Gowrie, for his clear and lucid explanation of the Bill. I am afraid that I cannot speak as enthusiastically about the Bill itself. I am struck by the contrast between the picture of the future, so far as the TSBs are concerned, which was presented to us when the Trustee Savings Banks Bill of 1975 was before this House, and the picture of the future with which we are now confronted.
That Bill, which was introduced at the end of 1975, as has already been explained, followed the Page Committee report on national savings. That report dealt in detail with the trustee savings banks. The Page Committee found that at that time there were 73 trustee savings banks of varying sizes. They provided an outlet for small savings supported by a Government guarantee and subject to tight Government control affording a limited amount of tax relief and offering limited banking facilities. A £50 deposit was required before a current account was permitted. There were no overdrafts or personal loans in those days. The majority of depositors were in the lower income group. The trustee savings banks were on the fringe of commercial banking.
The Page Committee had to consider whether changes were necessary and, if so, in what direction the trustee savings banks should go. As has already been made clear in this debate, the Page Committee decided that the trustee savings banks should become mutual banks, freed from much of the Government restriction and offering full banking facilities for personal accounts only, The government of the day, which was the previous administration to the present one, accepted that. The Bill which came before us at the end of 1975 and the early part of 1976 facilitated that. It was not long before overdrafts, personal loans, credit cards, and mortgage loans were available, and arrangements
1140
were made for the relaxation of the restrictions on investment. In their report, the Page Committee said:
"A set of mutual Banks similar in organisational form to Building Societies seems to us an excellent way of promoting a competitive service for the financial needs of the small saver and depositor".
The noble Lord, Lord Stoddart, said that there were to be three types of bank: the clearing banks, privately owned; the Giro, owned by the state, and the third force, which was to be different and was to be on a mutual basis. In this House, from these Benches, I welcomed those proposals, regretting the fact that it had been necessary to cut down the number of individual banks from 73 to 17, but realising the reasons why that was so. I expressed satisfaction that the regional structure, though greatly modified, was being maintained. A scheme was to be prepared by each bank for the appointment and removal of trustees by the depositors.
Our first major objection to the Bill from these Benches is that the concept of mutuality has been thrown overboard. The trustee savings banks are to become public limited companies, controlled by shareholders, just like the clearing banks. In other words we are creating—and I think the noble Earl, Lord Gowrie, said as much in his introductory remarks—another clearing bank.
The Page Committee in paragraph 263 of their report had this to say:
"The suggestion has been made that the Trustee Savings Banks should be hived off to the private sector as commercial concerns. If by this is meant that they should have shareholders and operate from the point of view of ownership like commercial banks we see such a solution as neither practicable nor desirable in principle".
The noble Earl has said, and the Government say generally, that the current ownership of the trustee savings banks is obscure and that Parliament must determine it. I would agree with that. But Parliament can quite as easily determine that it should be a mutual ownership. As has already been pointed out, there are many successful mutual organisations operating today: the co-operative societies, the building societies, and the mutual life offices. Looking at that latter group, organisations like the Scottish Widows' Fund, the National Provident Institution, the United Kingdom Provident Institution and others, can hold their own with the best of the proprietary life offices. One must ask why that should not be so in the banking field as well.
The noble Lord, Lord Stoddart, raised the question of the degree to which members of the staff and depositors will take up the opportunity to purchase shares. I should very much like to know what is the estimate of the noble Earl of the percentage of shares which will be held by members of the staff and depositors, and how much of the concern they are likely to own.
Our second objection is to the abandonment of regional principle. Of course, there will still be regional boards and there will naturally be a proper attempt to try to maintain a relationship between the local area and the organisation generally. But the organisation itself will no longer be controlled from a regional level in any way. The number of regional banks has been reduced to four: England and Wales; Scotland; Northern Ireland; and the Channel Islands. As I

1141
understand it, at least up until now the confederal structure, with autonomous individual banks co-operating, has been maintained. It is now proposed that the TSB group should control the individual banks which will become subsidiaries of it. Thus TSB Scotland Limited will be a subsidiary of the group covering the whole of the United Kingdom and operating from headquarters in the south of England. In other fields in the past Scotland has had the unhappy experience of ultimate decision-making being transferred from Scotland to London.
The trustee savings banks have contributed much to meet the financial need of small savers in this country. They have been identified with the localities in which their depositors live. They have been able to act purely in the interests of their depositors. Naturally we, on these Benches, wish them well in the future in whatever guise they may operate. But I think that I have said enough to indicate how strongly we feel about the abandonment of the concept of mutuality and the loss of local identity.
6.8 p.m.
Earl Ferrers: My Lords, I should like to thank my noble friend, Lord Gowrie, for having introduced this Bill this afternoon. I apologise to him for something which I daresay he did not notice, which was that regrettably I was not here for the first few minutes of his speech. I should declare an interest by the fact that, in concert with about 6 million other people, I am a depositor and a user of a Trustee Savings Bank. I should declare an interest insofar as I was chairman of the Trustee Savings Bank of Eastern England. I was a director of TSB Trustcard and also of the Central Trustee Savings Bank.
I welcome this Bill wholeheartedly. I was a little disappointed with the reactions of the noble Lord, Lord Stoddart of Swindon, and of the noble Lord, Lord Banks. They were not as enthusiastic as one might have expected. The noble Lord, Lord Stoddart, I think found every bogy possible about the Bill. I do not blame him for that; that is the duty of Oppositions and it is the duty of Government to reply and ensure that those bogies in fact shall not become realities.
To witness the transformation of the trustee savings banks over the past 20 years has been an exhilirating experience. They were, after all, originally a Victorian depository for the slender funds of those who were commonly called, in those days, the working classes. Their money was copper-bottomed. They were guaranteed a modest interest. They knew that their money and their savings were safe. What the Government did with the money was not their affair. They received their interest. They got their money back. It transpired, in fact, that the Government used the money frequently as a very cheap form of finance. I do not blame them for that. That was the history and the pattern of those days.
How this system withstood the changes of the twentieth century up to and including the 1950s and the 1960s—changes that were taking place all around the country in other financial institutions but from which the trustee savings banks were excluded—is, for me, one of the most astonishing wonders of the British financial system. Even in the 1960s, the trustee savings
1142
banks were paying about 2½ per cent. on their deposits. And if you were really brave and had shown that you were a good boy and had a certain amount of money in the ordinary department—I think that it was £500—you were allowed to invest in the special investment department where you received 5 per cent. Of course, overdrafts and such like were taboo. They were against the ethos of the savings bank movement which existed for savings. Yet, for some extraordinary reason, despite the attractions and the wooings of the outside commercial world and outside bankers, people still put their money in the trustee savings banks. The deposits still grew. The trustees, despite the magnificence of their name, could virtually do nothing. They were hidebound by Government and by that model of inventiveness, the Treasury.
I shall never forget the endeavours to get one simple thing introduced—to allow cheque books to be used by trustee savings banks. The pleadings and the arguments went on for years. It was like trying to move Mount Sinai. But still the deposits went on. I thought in those days that there must be either a lot of very stupid people or a lot of very loyal people in the country. In fact, there were a lot of very loyal people indeed to the trustee savings banks. Then came the Labour Government, bless their hearts. I pay tribute to them for what they did. In a quiet and unobtrusive way and as a lone example, they did a volte-face on all their political doctrines. They denationalised the trustee savings banks. They set them free. They set them free from Government control. They allowed them to compete in the harsh competitive world of the financial money markets. No one realised the political profundity of what the Labour Government did in those days. But they did it. I congratulate them for having done it and for the way that they did it.
However, for the trustee savings banks, it was rather like telling a person, who, after a long illness, has had the plaster removed from both his legs, to take part in a rugger scrum. Of course, the patient wobbled. But, for some extraordinary reason, he did not collapse. He took part in the rugger scrum. What is more some of the other participants in the scrum said, "Who is this new boy with the unshaven face? It prickles and it hurts". Mark you, my Lords, people inside the organisation, too, began to wonder what was going on and to wonder whether they were employees or trustees. "Our cosy existence is going to be altered", said some employees. Some of the trustees said, "This is terrible. We are not going to be wanted any more". Fresh air was blowing in through the organisation from all directions. Some found it was healthy. Some found it was chilling. Some just wanted to get out, and they did.
The 72 banks amalgamated down to 18. This process of amalgamation was considered very avant-garde. But there were still 18 banks, all proudly individualistic and vigorously jealous of their historical background, bound together by the slender corporateness of the central board. It was rather like having 18 Jack Russells being taken for a walk on a lead, each straining to ensure that the fulcrum jolly well moved in his direction. Fortunately, now, that struggling will be over. Now there are to be four banks—territorially, four—but operating with a sense of oneness.

1143
The transition of the trustee savings banks in the past 20 years I consider to have been fascinating. Few would have believed, even 15 years ago, that that diverse set of financial depositories would have developed into an exciting, competitive, attractive and attracting organisation—part of the clearing bank system, lending money, giving overdrafts, mortgages, life insurance, hire purchase, credit cards, almost the lot. It has been a remarkable transformation. It has a very unique advantage. It has a very wide base of public involvement.
When you see in the mirror of your car a car coming up behind at speed in the fast lane, the others want to watch out. And so does the driver. I welcome the Bill as being the last Bill to set the trustee savings banks totally free. One always thinks that everything is going to be the last. It does not always work out that way. I remember during the last war that someone made the profound observation that this war, like the next war, is the war to end all other wars. That may prove to be so with Trustee Savings Banks Bills. But this Bill does set the trustee savings banks truly free to reorganise themselves into a Companies Act structure, to enable them to issue shares, to enable them to become fully part of the private sector.
I congratulate the Government. I congratulate the trustee savings banks. I congratulate whoever it was—I doubt if it was only one person—who devised a system of determining who actually owns the bank. It could only be in the United Kingdom that an organisation is built up with resources of £700 million and yet actually belongs to no one. Even that conundrum has now been resolved although the noble Lord, Lord Stoddart, is not too fascinated by it, and the noble Lord, Lord Banks, does not like it. But it is a conundrum that has been resolved. I am sure that, under the new organisation, the Trustee Savings Bank will have a stout and effective position in the financial system of the country.
6.18 p.m.
The Earl of Iddesleigh: My Lords, I too must declare my interest. I have been connected with the TSB Group since 1970. In that year, I was first appointed a trustee to the then Devon and Exeter Savings Bank which was founded, I believe, in 1815. Today, following two reorganisations in the mid-1970s and 1983, I am a trustee of the TSB England and Wales and chairman of its South-West regional board based on Exeter. I am also a director of United Dominions Trust Limited, a subsidiary company of the group. I am a member of the TSB board here in London. At all times. I have been in a part-time non-executive capacity and, although prior to the mid-1970s, no fees were paid to board members, since I think 1975 or 1976, I have received a fee for my work. However, as I am not dependent on my fees for my bread and butter, I hope that I am not out of order in taking part in the debate. I also hold an account with the TSB.
I have naturally read with interest the Hansard reports of the debates in another place on this Bill. I should like to enlarge a little on some of the points raised there, and indeed in your Lordships' House this afternoon. First, I can assure the House that the
1144
decision to go public, assuming that the Bill receives Royal Assent, has not been taken lightly. Even before the passing of the Banking Act 1979 discussions and debates were taking place within the TSBs on their future and structure.
It may be appropriate here to remind this House of some of the provisions of that Act. I think that possibly too much has been made of the share issue, and attention has not been focused on this vital part of the legislation. The Explanatory Memorandum to the Bill which passed into law as the Banking Act 1979 stated that it would provide for the prior authorisation and supervision of institutions which took deposits from the public. A two-tier system of authorisations would be established whereby institutions satisfy a wide range of exacting criteria might be recognised as banks, and other institutions would be eligible for a licence to take deposits. The first crucial decision taken by the TSBs was to work towards full banking status rather than be just a licensed deposit-taker.
Certain institutions were exempted from these provisions. Among them, because of their special transitional relationships with Her Majesty'sTreasury, were the trustee savings banks. The Treasury was given power to vary the list of exemptions, and it was stated at the time that removal of the exemption of trustee savings banks was envisaged,
"at an appropriate stage of their development".
This was compatible with an EEC Directive—No. 77/780—providing for member nations to establish, over a period of time,
"laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions".
The time has now come for the trustee savings banks to be released from special Treasury regulation and to become appropriately subject to the requirements of the Banking Act 1979.
It is submitted that the provisions of this Bill now before Parliament, whereby a Companies Acts structure will be applied to them, provides the most appropriate means for the TSBs to achieve suitable status under the Banking Act. They are already recognised, in the general sense of the word, as a banking group. They enjoy a high reputation and standing and they provide the necessary wide range of banking services. This reputation has been enjoyed for some considerable time, and the full range of services has been developed by one of the most significant transformations of operations in banking history in the decade, following the publication of the Page report, as the noble Earl, Lord Ferrers, has just mentioned. It is now necessary to provide the TSBs with the means to enable them to demonstrate to the authorities responsible for banking registration and supervision that they have the management structure and accountability to qualify as a recognised banking group. As I have said, this Bill provides such a means.
I must confess that originally my regional board and I, and indeed many others in the group, were more in favour of keeping the existing more cosy, mutual type of organisation, even though this would have left unanswered the ownership and accountability questions. However, after considering all the arguments, the TSB Central Board, certainly my regional board and I, and, as far as I know, all regional

1145
boards, are unanimously in favour of the PLC answer. This decision was not forced on the TSB by Her Majesty's Government. It is the wish of the TSB Group itself, after literally many hundreds of hours of debate and discussions on this point.
As your Lordships know, the TSB is committed to reserving a large proportion of the share issue for its customers and staff if they wish to subscribe to our issue. I refer to the letter of 6th December of our chairman, Sir John Read, which the noble Earl, Lord Gowrie, has already mentioned. It is attached to the White Paper. In another place Questions were asked as to how large this proportion was going to be. I can assure this House that no firm decision has yet been taken. I am sure this House will agree with me that no firm decision can be taken until the group is closer to the day of its issue and market research has been done. I can further assure the House that it is the central board's intention to have initially (and to try to keep) a very large proportion of our shareholders from our customers and staff. I speak here for all members of the central board. As I have said, we are firmly committed to that.
It is true that this will mean a large register of shareholders. Even if the proportion is 10 per cent., that is 600,000 shareholders from our customers and staff. Consequently, the price of the administration of this register will be slightly higher in proportion than a normal issue of this size. Nevertheless, the central board accepts that—this will not be a normal issue. The TSB is not a normal bank. I say, "not a normal bank", because I believe, having worked for the TSB in a non-executive capacity, that I have the feeling of it. I realise that working for the TSB, or even being a customer of the TSB, engenders a rather special loyalty, which, again, the noble Earl, Lord Ferrers, mentioned. I do not think this loyalty exists to anywhere near the same extent in any other financial institution.
The noble Lord, Lord Stoddart of Swindon, and other noble Lords have raised several points and queries. Frankly, they are too many to answer now, on Second Reading, and I hope that if amendments are put down I shall be here in your Lordship's House to help answer them. However, I should like to try to answer one point which was raised by the noble Lord, Lord Banks. He mentioned the question of regional representation. From my own experience, I am quite sure that one of the reasons for this loyalty is that we have—and we intend to keep—strong, interested, non-executive regional boards. They are drawn at the present time from a wide range of professions and occupations. I can speak only for the Exeter-based hoard, but there we still have a large proportion of board members who are ex-trustees of their local banks. They regularly visit our branches and take an interest in all our staff. The newer members of my board have certainly caught on to the spirit we have established and are as enthusiastic as the older members as to our future. By retaining our regional boards and recognising their importance I feel the TSB Group is going a long way towards retaining not only its humble beginnings but also its rather special place now in the market place.
Finally, I strongly commend this Bill to this House. The TSBs have demonstrated that they are well
1146
capable of running their own affairs. Our clearing arm—the Central Trustee Savings Bank—has already established itself as a much respected organisation in the City of London. We are still increasing the range of services we can offer our customers. As your Lordships have already been told, the money raised by the share issue will go towards increasing this range of services. The passing of this Bill will complete the transition from a purely savings organisation to a fully-fledged bank and allow the group the independence it needs to compete fully in the high streets of England, Scotland, Wales, Northern Ireland and the Channel Islands.
6.29 p.m.
Lord Wilson of Langside: My Lords, so far in the debate one simple point has emerged with clarity; that is, that this Bill enacted, as I am sure it will be, will see another chapter in a remarkable success story which began around 175 years ago. That success, achieved from such simple beginnings, is a fascinating tale, and the noble Earl, Lord Ferrers, touched upon it. The achievement was, of course, the achievement of the founders, the trustees, the managers and the staff, and was due to the thrift of the depositors. So far as I am aware, no group of political enthusiasts can claim any special credit in the matter at all. We know that successive Governments—Whig and Tory I suppose, and Conservative and Liberal, and latterly Labour Governments—have been concerned only to provide a statutory framework within which the banks could operate, defining the duties of the trustees and the rights of the depositors and, having provided that framework, to modify it from time to time as changing social and economic circumstances made necessary.
I gather that the principal criticism directed against this Bill and the framework which it provides centres upon the point that the Government have not followed the path recommended by the Page report and created a framework within which TSBs could operate as a mutually-owned third force for the banking world, but have opted instead for the PLC structure. I do not propose to enter into that argument because, frankly, as at present advised, I should not attach any very great value to my judgment upon it, and accordingly I shall not waste your Lordships' time in that area.
Faced with the competing dogmas of the political patent medicine men, and now women, too, of the Conservative and Labour parties, I have no difficulty in concluding that above all our country needs a third force in her political life; but as to the need or not for a third force in the world of banking, I shall suspend judgment and I hope, with your Lordships' assistance, I shall be able to reach a conclusion upon it by the time our debates are concluded.
Although over the years I have had some association with the old Savings Bank of Glasgow—as a customer in the 1930s and later as a trustee or manager ex officio—it never occurred to me to intervene in this debate until the very last minute when I recalled the village of Ruthwell, in Dumfriesshire, which I first came to know when, on one or two occasions, I was the Labour candidate in the county of Dumfriesshire. I then learned of the extraordinary Dr. Henry Duncan, the parish minister who had started it all. Dr. Duncan started the savings bank in Scotland in 1810, taking deposits of one shilling at a time when the banks would

1147
not take less than £10, which was as much as an agricultural labourer earned in a year in those days.
Then I thought that I might try speaking for five minutes or so on the early history of the savings bank when, unfortunately, I discovered that Sir Hector Monro, the Member of Parliament for Dumfriesshire, had done just that in the other place, and I did not want to be repetitive. However, there is one point worthy of comment in Sir Hector's speech. He referred to the close interest that the TSB had taken in Dr. Duncan and to the well-tended museum which had been established in his old cottage in Ruthwell. Sir Hector expressed the hope that all the financial pundits in the other place would visit it and kneel at the shrine of Dr. Duncan who began it all. I thought that that was a very good idea. Indeed, it was just the kind of thing that I would commend for the grandees of a great variety of our national groupings. It is just the kind of thing that I would commend to, say, lawyers and, perhaps, politicians as well as bankers: a pilgrimage for reflection and prayer at the shrine of the visionaries of whose wisdom they are the beneficiaries. It might induce a touch of humility. I do not know about bankers, but I can think of a few lawyers and an odd politician or two in whom a touch of humility would not go amiss. It might also of course inspire. Therefore, that is something that might be taken aboard—visits to the shrine.
As I thought about all that background and the constant use of the jargon word "unbanked" and the debates in the other place, there frequently intruded into my mind two lines of the words of W. S. Gilbert's "Gondoliers" about,
"The aristocrat who hunts and shoots,
The aristocrat who banks at Coutts".
Quite seriously, it will surely be important to remember the significance in the past of the special relationship between the savings banks and their depositors, of the bankers place in, and their involvement with, local communities, and of the need to provide a competitive service for the financial needs of the small saver and the small depositor. I would hope that, when the Bill is passed, the managements in this new framework, whatever form it takes, and whatever your Lordships decide to be the right one, will remain dedicated to these particular ends. No doubt in Committee we shall discuss whether we should include further provisions in those directions, but in any event, the Bill will no doubt pass before very long.
6.39 p.m.
Lord Houghton of Sowerby: My Lords, I do not wish to take up too much of the time of the House at this stage, especially as I am due to speak in a subsequent debate of some importance. However, I want to say straightaway that this Bill makes me very cross indeed. I am astonished that the noble Earl, Lord Ferrers, should be so complacent about some of the proposals—not the provisions in the Bill, but the proposals in connection with the Bill. My grievance concerns the treatment of the depositors, of whom I, like the noble Earl, am one. My membership goes back many years; with my father before me, we have well over 100 years as depositors in trustee savings
1148
banks. I have regarded myself as a member, though technically speaking there is no membership of the trustee savings banks. But I felt that I was a member just as much a trustee savings bank as of a building society, or a co-operative society. It has not been noticeably different in the rewards that one gets for the investment.
This loyalty, to which the noble Earl, Lord Iddesleigh, referred, is a potent factor in all these movements which had their origins in working-class combination for self-protection. Unless that is understood, one can never appreciate how strongly some people feel about the institution to which they belong. Certainly I have felt strongly about it. I have felt that the trustee savings bank movement was something that I should support, and I have supported it. Whatever the conditions they offered, I have thought it a duty to foster the movement to which my own family have been attached for so long. That is something that noble Lords may not understand, but I am sure that it has a profound influence upon those who have remained loyal to the trustee savings banks and other similar institutions over many years.
Earl Ferrers: My Lords, may I interrupt the noble Lord? While he has been saying that, he has been looking at me with a penetrating eye. I actually said that there were a great many loyal people—6 million of them. I hope he does not think that I was assuming that there were not a lot of loyal people, because I said there were a lot.
Lord Houghton of Sowerby: My Lords, I must apologise to the noble Earl for not having acknowleged that he referred to the point. Had not the noble Earl, Lord Iddesleigh, referred to it, I would have fastened on to what the noble Earl said in that regard. Coming from the quarter it did, from a member of the central board, I thought that I was entitled to refer to what he had said.
Now, why am I so cross about the way the depositors are being treated? The White Paper says:
"The making of a deposit with a trustee savings bank and the earning of interest on that deposit does not carry with it the implication of a share in the ownership, or a claim to the reserves, of the bank".
That is what I dispute. In the few minutes during which I shall speak I want to deal with this central fallacy that the trustee savings bank belongs to nobody, and that when it does belong to somebody it should belong to those who subscribe for shares in the ordinary course of a flotation of a new public limited company.
I believe that depositors are entitled to a share of the equity of this company. What this proposal does is to question the right of the depositors to any preferential share of the equity, though I think when there is doubt as to who property belongs to one can take a commonsense line, and that is that property belongs to where the money is, and the money is the depositors' money. The whole of the trustee savings bank movement, its profits, its reserves, everything connected with it, has been built upon the deposits of the depositors. Therefore it is their contribution to the prosperity of the trustee savings bank which should now be acknowledged.

1149
Another point to bear in mind is that all small savers throughout the whole period of inflation have been cheated. They have been cheated by Government and they have been cheated by institutions because they have used the money of small savers at less than the going rate, and they have relied on the loyalty and the unsophistication of small investors to keep money available on such favourable terms to those who would take it.
Nobody who invested in the trustee savings bank over the years got any hedge against inflation, as nobody got a hedge against inflation in the Post Office, and as nobody got a hedge against inflation in the building societies. All small investors—the working-class movement which supported these institutions—have been cheated during this period of inflation. That is another reason why, when it is proposed to transfer an institution from its historic environment to a new and more competitive and, so to speak, capitalistic enterprise, now is the time to deal fairly with the depositors.
What is involved here is taking the depositors' share of the equity, selling it, putting it on the market, and telling the depositors that they can buy it back if they like, and priority will he given to them if they wish to buy back their own share of the equity and the assets of the bank. That is coming near to a sleight of hand. Indeed, people in the City have gone to prison for less than this. I could use a strong word in connection with this, but I shall say that I think the depositors are being diddled.
Just to safeguard their right to acquire at the market rate a share in the equity which really belongs to them anyway is not the bargain which this arrangement should offer to them. Even though we may have shareholdings and a public limited company, some means should be found of providing the depositors with a rights issue or other means of discounted purchase of the shares; certainly do not ask them to buy at the market rate and think you are virtuous in safeguarding their claim to some modest share of the total. This idea to give priority to depositors is just insulting. Depositors own the dammed thing, and I do not think that one can say that they are on sufferance at all. I feel that this is the central feature of the arrangements before the House.
As for the proposed safeguard against a dominant shareholding in the company, I do not think that the 5 per cent. limit over the next five years, or the 15 per cent. limit over the remaining 15 years, are any safeguards at all. As my noble friend Lord Stoddart pointed out, there is no way of preventing people acquiring shares over these limits if they want to, or if the company decides that they shall. That is another reason for giving depositors a firm stake of their own in the company.
The staff occupy a different position. I do not suggest for a moment that they should not also have preferential treatment, but certainly when a company is starting from the theory that nobody owns it, then is the time to try to dish out justice to those who have been engaged in the enterprise and have contributed to it over such a long period. After all, what is 5 per cent.? It takes only four people to acquire a 20 per cent.
1150
share, which is a substantial shareholding for a combination of four people in any public company. If later the four people get together to acquire 15 per cent. each, then they have control of the company. I do not see that that is an adequate safeguard against the possibility of being taken over or the possibility of a dominant shareholding which may seek to alter the course of the whole enterprise.
Mark my words, my Lords, I do not think that the term "trustee savings bank" will last for ever, either. One notices over the years how the original descriptions of institutions which had been quite proud to be related to their environment and origin are gradually shed because they are not in keeping with the status which it was hoped to have in a different world entirely. The Co-operative Building Society became Nationwide; the Workers' Travel Association became Galleon Travel. I could recite other examples. Where there has been a relationship with a movement from which they sprang there has been a tendency to move away from it and seek a title less associated with their origins. It is perhaps inverted snobbery. I do not think that the term "trustee savings bank" will last very long. It will not be thought to be in line with the clearing hank movement that they are going to join. That is the main point that I wanted to make.
I shall conclude by saying that I hope noble Lords will read the debates in the other place because there was a Division on Second Reading there as well as a Division on Third Reading. The Bill met with a very mixed reception there. It was not wholly on party lines and I wonder whether it is at all proper for the Government to be acting as parliamentary agents for what ought to be a Private Bill. This is not really, and should not be, a Government Bill. The Government's interest in this is to release the trustee savings banks from controls that have been put there by Parliament. Although I think that the Government should help to advise a trustee savings bank and other institutions that want to promote themselves in a different way, I do not think that the Government should he acting as the agents for them, defending from the Government Benches matters which are particularly related to the conduct and proposals of the company or those who are at present organising it for the future. My Lords, we are going to have a busy time at Committee stage.
6.51 p.m.
Lord Bruce-Gardyne: My Lords, like the noble Lord, Lord Houghton, I shall aim to be brief although for a somewhat different reason: I think that I am probably infectious and I would rather limit your Lordships' exposure. Like my noble friend Lord Ferrers and the noble Earl, Lord Iddesleigh, I must begin by declaring an interest as a director of the Central Trustee Savings Bank, and perhaps also a secondary interest in that when I was a Minister in the Treasury I was very much involved in what might be called the building of the foundations of the edifice of which (what shall I say?) a facade is presented to the House tonight. So your Lordships will not be surprised if I say that I hope very much that this Bill will be given a fair wind and a rapid course to the statute book, and that I was a little disappointed by some of the responses from the other side.

1151
I was very interested to hear the noble Lord, Lord Houghton, pointing out that the working classes, as he put it, had been "ripped off" by the processes of inflation through the holding of their savings in institutions such as the Trustee Savings Bank. I think there is a lot of truth in that and I sometimes wish that the party of which he was such a distinguished member showed more concern about the impact of inflation on the poorer section of the community than they seemed to show when they were in office. But, that apart, I would not want to elaborate on the descriptive passages which my noble friend Lord Ferrers and the noble Earl, Lord Iddesleigh, gave your Lordships so eloquently on the background to the TSBs and the evolution which has been almost, one might say, miraculously achieved over a period since the publication of the Page Report to which there have been several references.
Because of my own direct involvement, I want to concentrate briefly on the more immediate past and in particular, on the argument about mutuality versus PLC status. Of course, it is true (as several noble Lords have already pointed out) that there was a lot of argument and discussion as to which was the more appropriate route to go down. But I have to say to the noble Lords, Lord Stoddart and Lord Banks, that I wonder—and I wondered at the time when these discussions were going on with the TSBs and within the Treasury—whether the building societies are necessarily in this respect such an ideal example of the consequences of mutuality as seems to have been suggested this evening. I wonder whether all depositors in recent years in some of the major building societies have felt that the principle of accountability of the directors of those building societies has exactly worked out to their satisfaction. That is not the impression that one is given, and it seems to me—and it did seem to me—crucially important that one should establish a clear principle of accountability for the TSBs as they left the wing of the Treasury and moved out fully fledged into the private sector. I must say to your Lordships that I could not see then and I do see now how that could be satisfactorily achieved except down the PLC route.
The noble Lord, Lord Houghton, felt almost the victim of highway robbery. I listened very carefully to his comments on the issue of what I believe is known in the jargon as the "ownership of produce", the produce of the bank, of the TSBs. I am no lawyer and I should not like to bandy legal provisions with the noble Lord; but I must say that it was my understanding at the time and has been my understanding ever since that the best available legal advice was that there was indeed no legal entitlement in the hands of depositors to produce. I have to put it to your Lordships that it is not immediately apparent, even supposing that there were to be conceded some legal entitlement to produce, as with whom precisely that ownership would rest. At what date would the ownership be struck? Should those who had happened to make their deposits on the eve of the publication of this measure or at a date fixed before which the chopper should come down, be entitled to produce?—while others who might have wound up their deposit accounts some weeks before, after having
1152
suffered precisely the depredations of inflation on the very modest interest that they had traditionally received, and to which the noble Lord referred, should be denied. Should the late comers be privileged and the ones who had been there faithfully (as my noble friend Lord Ferrers pointed out) through many long years be denied?
It is impossible, I submit, even if there had been any grounds for accepting that there was some entitlement to produce—and I believe that there was none—to see how that could conceivably have been established on a basis which would appear like equity to all those who had been or were presently concerned.
I must say that I find the responses of noble Lords opposite a little disappointing. I am bound to say to the noble Lord, Lord Houghton of Sowerby, that I wonder whether all his fellow depositors will be quite so unenthusiastic about the opportunity to acquire by priority (as Sir John Read has pointed out in his letter, to which many references were made) a stake in this business when the flotation occurs. I have to suggest to the noble Lord, Lord Houghton, and others that the enthusiasm which employees in British Telecom showed, and are still showing, to acquire an equity stake in that business hardly suggests that there is going to be a wailing and gnashing of teeth among the depositors and the employees of the trustee savings banks when the flotation occurs. I believe it will be very much the opposite.
I just want to pick up one reservation which the noble Lord, Lord Stoddart, made in his remarks, the question of protection against a possible future takeover. He made your Lordships' hair curl with the prospect of the four major clearing banks each taking a 15 per cent. stake in the business. I have to say to the noble Lord that if they tried doing that, they might in the first place have a certain amount of explaining to do to the take-over panel (in whatever form it may exist in that brave new world) which has tended to have a certain resistance to what are known as "coffee housing" or various other euphemisms for that kind of acquisition of ownership of a business. And, quite apart from that, if any one of the existing clearers acquired a 15 per cent. stake in the TSB when that will have become possible, I cannot see how that can fail to be a matter for the scrutiny of the monopolies commission which will still be there. Therefore I think to some extent that these anxieties are over-stated. But I must say that in my view, while it is perfectly right and proper during the period of its emergence from the chrysalis, as one might say, into its full-fledged status as a publicly-quoted PLC, that the management of the TSBs should enjoy a measure of security against the predators in the big wide world, I do not think that unlimited security in that respect could be regarded as desirable. The compromise which is set out in Sir John Read's letter gets the balance just about right.
My own hope and expectation is that although of course this is a totally different animal, as my noble friend the Minister has pointed out and as the noble Lord, Lord Stoddart, has acknowledged, from a genuine privatisation such as British Telecom and the like, nevertheless I believe there is every prospect that the TSB, when it comes to flotation, will achieve another giant step forward towards the concept of a share-owning democracy in this country, thereby

1153
building upon the achievement of British Telecom in that respect. I think that will be a consummation much to be desired.
Perhaps in conclusion I may, from my own experience, just express a word of appreciation for what I believe has been the remarkable achievement of the present chairman of the TSB, Sir John Read, in leading the banks together forward into this new era and presiding over what was bound to be a hazardous and difficult transition period. I think that has been supremely well achieved and I hope that when your Lordships—as I am sure you will—give godspeed to this Bill, the TSBs will emerge, if not precisely in the form that Page envisaged, nevertheless as a new force in banking from which the consumer, the employee and the depositor will all greatly benefit.
7.3 p.m.
Lord Grimond: My Lords, I regret, like my noble friend Lord Banks, that the savings banks were not mutualised, but I follow the powerful arguments which have been advanced by the noble Lord, Lord Bruce-Gardyne, and I do not want to continue with that debate, which has been fairly fully explored.
I want to raise four questions. The first two are rather minor. One concerns the name. The name "Trustee Savings Bank" has a long and honourable history and meant something. It seems to me that it will mean very little in connection with the new bank: the word "Trustee" is not very relevant to it. As for the initials "TSB", I find it exceptionally boring and I very much doubt whether it is an attractive name for what is said is going to be a new, enterprising and forward-looking bank.
The second small point is this. I wonder whether the noble Earl could tell us a little more as to what is going to happen to the Airdrie Bank. Will that continue as an independent saving bank or will it be open to it to amalgamate with the new TSB? There were rumours that it might he taken over by one of the Scottish banks but it seems to me that it would he rather more to the advantage of the savings movement in general if it were to come into the TSB fold.
My two main questions are first of all, about local investment. I have been much struck, particularly looking at the accounts of the Aberdeen Savings Bank, which covers Shetland, at the great amount of money which it has been taking in, particularly of course from the oil areas. The fact is that it has at least until fairly lately—it now has a unit trust, of course—taken this money off to London, where it has been very useful to the Government but has not given a very good return to the investors, and of course has been steadily eroded by inflation.
What has really killed that form of savings has been inflation. What is lacking, it seems to me, in our financial arrangements is any machinery for directing local savings into local equity investment. Instead of that, we take it down to London; it is given over to Government in point of fact and then local industry depends almost entirely upon grants which come back from London. In most countries there is a far stronger local banking system which does to some extent channel local savings directly into local investment. I just wonder whether there is any chance, now that we
1154
are introducing a new form into the general banking system, of that being encouraged.
My second point is control in Scotland. As has been said, this movement grew up in Scotland and there seems to be now a very grave danger that it will be controlled from London. I know there are going to be four regions, and certainly Mr. Macdonald, the Chief General Manager in Scotland is a man of extreme enterprise who will do his best to maintain the Scottish identity of the Scottish Savings Bank. But looking at recent developments, all privatisation measures have really been of primary benefit to the City of London. It is the big City of London institutions which have carried them through and which have benefited chiefly from them, except of course for some employees who got special conditions. But even so, outside British Telecom, the number of shares available for employees was not very large.
I would ask the Government: is there any possibility that they may be able to take steps to ensure that Scottish control is possibly exercised over the operations in Scotland or at least that Scottish individuals and Scottish institutions have a fair crack of the whip when the next stage in the development of the savings banks takes place? I think it would be a tragedy from Scotland's point of view, and indeed from the banking point of view, if control were removed to London. I believe it would further encourage centralisation, which would be very bad for local investment. Therefore, while I welcome the opportunities which the savings banks now have, I believe that the really important point is what happens next and how the later development of the savings banks is done. With those reservations, I would certainly wish the Bill well.
Lord Jacques: My Lords, I apologise to the House for intervening in the gap but it will be for one minute. I want to put a question to the Minister which I hope he will be able to answer in his winding-up speech. The bank will keep whatever the shareholders pay for their shares. The bank will belong to the shareholders collectively. Therefore, whatever the shareholders pay for their shares, they will get the present bank as a gift. That is, I contend, fair and logical reasoning and I invite the Minister to fault it.
7.8 p.m.
Lord Taylor of Gryfe: My Lords, as we are near the end of this debate, I will be brief. I should like first to thank the noble Earl, Lord Gowrie, for his usual clarity in introducing this Bill. He has been somewhat less controversial than in some of his more recent contributions to debates in this House, although he has upset the noble Lord, Lord Houghton of Sowerby.
We have benefited this evening from the experience, knowledge and enthusiasm of several noble Lords who have had, and still have, an association with the Trustee Savings Bank. Inevitably the debate has centred round the question of mutuality or PLC status, and I will return to that in a moment. Perhaps I may just say to the noble Earl, Lord Iddesleigh, that while I was impressed by his statement that he and his colleagues had given a great deal of thought to the question of mutuality or PLC status, I should like to quote a witness on the other side. Mr. Bryant, who until recently was Chief General Manager of the TSB,

1155
has appeared on television recently, regretting that the route of mutuality has not been taken. I would suggest that his experience in this field ought to be considered in arriving at our conclusions. I am not doctrinaire in these matters, but I believe that we have an opportunity in this Bill for doing something interesting and unusual.
I am a great believer in the mixed economy. I believe it is wrong to have a totally dominating state economy and it is equally wrong for any society to deny opportunities of experimenting in economic forms. We have a chance here in this Bill of recognising the existing powerful clearing banks with their rightful place in our economy. We also have the Giro bank, a state bank, a post office bank, and now we have the opportunity in this Bill to have a different kind of bank, a bank owned by the depositors, and this could be a real third force. This would bring an interesting variety in our banking experience and might be well worth while.
As has been stated in the debate, the Scottish connection is well established and the noble and learned Lord, Lord Wilson of Langside, has mentioned the question of pilgrimages to the home of the founder in Dumfries. I visited a very large mutual insurance society in the United States recently, Nationwide Insurance, and they have built themselves a magnificent new head office in Nationwide Plaza in Ohio. But next to the board room in that office they have rebuilt the farmhouse, or at least one of the rooms of the farmhouse, of the original and distinguished founder of that great organisation—a man called Mr. Murray Lincoln. It is a permanent reminder to the directors of that great insurance company that their origins were well established by a simple farmer of the Middle West and that they have some responsibility for maintaining the traditions and standards which were set by their founder.
In discussing this Bill we have to be mindful that we, too, are custodians of a tradition and that the people who at the beginning of the 19th century set up these banking institutions for the small depositor, to encourage thrift, made an important contribution to our society and to our social life. They collected the pennies, as was said before, while the major banks were concerned about the pounds. They arrived at a period in our history, like the co-operative societies and the friendly societies, and all of them in turn made an important contribution to our social life and to our communities. We should not readily discard that tradition in favour of creating just another clearing bank, because that is all we are doing. All we are doing is transforming this institution, with all its rich historical traditions and its importance for our communities, and creating just another bank on the high street or in the villages. So we should just think twice. It is like a Bill being introduced into this House to convert the co-operative societies of this country into Tesco's. It might have its attractions in some ways, but it would not be socially defensible.
Those of us who are concerned about the future structure of the TSB accept the need for change and for legislation. As has been evidenced in the discussions in the House this evening, there is confusion over ownership and that has to be clarified in legislation. I
1156
think everyone welcomes the removal of the TSBs from the supervision of the Treasury—in fact, they had become a branch of the Treasury in many ways—to the supervision of the Bank of England which is their rightful place, and I think we all accept the need for a national structure and even national direction of policy in many areas of the TSBs.
The development of chequeing services, the development of credit cards and the centralisation of investment policy are all essential to the good functioning of the TSBs and, inevitably, structural changes have to be taken care of. But at the same time most of us are concerned about the deep roots of the TSBs in the regions, and particularly in the Scottish region. If you look at the structure as outlined in the Bill, it provides that the shareholders will elect their board like any other PLC, but the board will, in turn, elect the regional directors—not the shareholders in Scotland electing their board, but the members of the Scottish board being appointed by the central board, which means that they are rather far removed from democratic control and election by the shareholders.
I am interested, too, and I am sure that the noble Earl, Lord Gowrie, is also interested, in some commitment that is made in the White Paper and in the Bill to contribution to foundations. Perhaps the noble Earl will tell us a little about the scope of these contributions, because that is important to the communities in which they operate, and it may even help the noble Earl with some of the problems that he has with the Arts Council at the moment. So that is important.
Then the question of widespread share ownership is a matter which concerns us, and I am sure that this concern is shared by others in the House. Some figures were quoted during the debate in the other place and it was said that only about 40 per cent. of the depositors were in a position to take up shares. That would be unfortunate if it were true, and I suspect that, since many of the depositors are very small depositors, it may be true and the possibility of the widespread share ownership which is envisaged may not, in fact, be realised.
A great deal has been said about the prospects, the inventiveness and the imagination of the present management of the TSB. I certainly pay tribute to them for many of the changes that they have made in the last few years. But, once they emerge in a period when there is a banking revolution going on in the City, they will have to assume certain responsibilities which include a degree of high risk. There will be pressures on the TSB for profits for their shareholders, at the same time as there will be a demand for a continuation of the services which have been traditionally maintained by the TSBs.
The Financial Times, reviewing the anual report to the depositors last week, quoted:
"The harsher climate of retail banking has already begun to tell on the TSB, well before its flotation."
It went on:
"the traditional loyalty of TSB members will be tested to its limit unless the bank brings its rates more in line with building societies".
There will be pressure on the TSB to service the new shareholders at the time as there will be pressure from the depositors to pay competitive rates, and that may

1157
not be easy. I should just like to add that in an interesting article on the same subject of the future of the TSBs, which appeared in the New Stateman last week, it was pointed out that the TSBs exist in areas where a community service is necessary like Easterhouse near Glasgow, where there are no clearing banks, there is 35 per cent. unemployment and there are 42,000 people who need a banking service, but only the Giro bank and the TSB choose to operate in that terribly depressed area.
As I say, there will be pressure on the TSB to maintain that kind of service. But, as everyone who is in the clearing bank business knows, their profits are affected at the moment—for example, in the case of the Royal Bank of Scotland—by the proliferation of a whole lot of branches all over the country, which is very expensive. The TSB will have to face the responsibility of maintaining the local and regional distribution of branches, some of which are uneconomic, which is traditionally their position, at the same time as the new shareholders will insist on strict economic discipline and high profit earnings.
These are some of the matters at which we shall be looking in the future. We wish the TSB well: there is no doubt at all about that. We are sorry that the mutual principle is not being observed in this case, and we hope that all the promises contained in the Bill and made by speakers from the other side of the House will be fully justified by the results.
7.21 p.m.
The Earl of Gowrie: My Lords, I yield to no one in my appreciation of continuity, regional roots and the trust of communities which are served by institutions, but it is nonetheless forever fascinating to me that arguments against change and development are these days made far more by the opposite side of the House than by my highly conservative friends on the Back-Benches. At one point when the noble Lord, Lord Houghton of Sowerby, was speaking, I almost felt that he might be nostalgic for a system which delivered 1 per cent. or 2 per cent. in interest and delivered most of the money in the TSBs to the Government as an adjunct of National Savings.
I am glad that the noble Lord, Lord Stoddart of Swindon, felt that the Bill which I put before your Lordships was altogether uncontaminated by privatisation, as he would see it, and agreed that the Treasury was not going to do well out of it. The Treasury, like the country at large, has a great interest in a wider participation of people in our financial system. I believe that it is one of the most successful aspects of the Government's policy that wider share ownership has been promoted. I know that this is a principle dear to the Alliance Benches, though they seem to be greeting it with modified rapture this evening. I believe that this Bill will create a greater dispersal of share ownership than hitherto.
Many of the points made to me were of the kind which are liable to come up at Committee stage. Your Lordships gave me a good run in my opening speech, and I do not want to be too long now. The general philosophy of the Bill and, indeed, many of the criticisms put to me by noble Lords opposite, could not really be better answered than in the words of the
1158
noble Earl, Lord Iddesleigh, speaking from the Cross-Benches. He said that it was time for the TSBs to be released from Her Majesty's Treasury regulations and made subject to the Banking Act 1979. He said—and I hope I quote him correctly—that they are already recognised as a banking group; they enjoy a wide reputation and high standards; and they should be able to offer a wider range of services—not least, may I say to the noble Lord, Lord Houghton, in the interests of their depositors.
The mutualisation argument has been discussed extensively, and I dealt with it in my opening remarks. Perhaps I may say to the noble Lord, Lord Stoddart, if I may take a more minor or technical adjunct to the argument, that it seems to me wrong to confuse wider ownership—the ownership of shares—with mutual ownership. The noble Lord asked me what pressure customers and staff have exerted in favour of the Companies Act. The proposals have been widely known since August 1982, and very few comments have been made. The TSBs have kept staff fully in the picture, but that, of course, is their business. I agree with my noble friend Lord Bruce-Gardyne, who has taken a leading role in the build-up to the present Bill, that staff will use their preferential position, as indeed will many depositors, to acquire shares. But, of course, I cannot force them to do so, and nor should I be able to do so.
The noble Lord, Lord Stoddart, asked me what "no one" meant in relation to no one being able to own more than 5 per cent., or later 15 per cent., of the shares. That simply means any legal person. He asked me what was to stop groups of individuals or companies buying blocks of shares under their entitlement. Again, I think he was answered very well later on by my noble friend Lord Bruce-Gardyne, who suggested that the monopolies and mergers legislation would apply should this highly unlikely scenario of takeover take place.
As to the question of the sale of shares abroad, of course there is no stipulation in the Bill on the subject, but the TSBs are unlikely to offer shares abroad; and, in any case, the anti-takeover and monopoly and merger provisions to which I have referred apply equally to foreign as to domestic purchasers of shares. I do not believe it possible or indeed appropriate to control the residential status of purchasers of shares, which will in any case change from time to time.
A number of noble Lords were worried about loss of regional status of individual banks and about the loss of local identity. I shall come back to that briefly when I deal with some of the points that were made about Scotland by the noble Lords, Lord Grimond and Lord Taylor of Gryfe. But, generally, banking policy will be carried out by the individual banking subsidiaries in Scotland, England and Wales, Northern Ireland and the Channel Islands, not by the holding company. The holding company is not itself a bank.
The noble Lord, Lord Stoddart, asked me how many depositors will buy shares. I have to some degree dealt with this. I cannot possibly know. I hope that a great many will. The precedent of privatisation in another context and its popularity has indicated that the take-up will be good. The noble Lord, Lord Houghton, based his argument on the view that depositors were the owners of the trustee savings

1159
banks. My advice is that that is simply not the case. In my judgment it is also wrong of the noble Lord to say that the basis of the trustee savings bank tradition was working class self-help. The trustees of the original banks were employers, though admittedly of a benevolent kind.
We are dealing here with a great tradition of nineteenth century paternalism, but one which is not appropriate in this particular day and age—and it seems to me to be a little patronising to suggest that it might be. Of course, I profoundly agree with the noble Lord, Lord Houghton of Sowerby, that inflation hits the poorer or smaller groups of savers worst. That is why we are determined to get inflation down, and we have achieved some considerable success in that area. That is also why it seems to me right that a wide and diverse range of banking services should be offered by the TSBs in order to protect and augment the savings of depositors.
It would be inequitable if we were to distribute the proceeds of sales among individuals who happen to hold trustee savings bank accounts at a particular recent date, because the group's resources have been accumulated over generations. That is pertinent to the questions concerning ownership raised by the noble Lord, Lord Houghton. He also asked me why the Government were promoting a Private Bill. I do not deny that the Bill is an unusual one. Indeed, the first sentence of my opening speech said just that. But large parts of the Bill are clearly public policy, and all earlier TSB Bills have been public policy. Only Parliament can reform TSBs, and, given the Government's special relationship and Treasury controls over TSBs, it is natural and right that the Government should bring forward this particular Bill.
I share with the noble Lord, Lord Grimond, a distaste for acronyms. I tend to ask my officials to spell things out in my briefs whenever they can. But there is no doubt that acronyms have gone very deep in our society, and they are difficult to eradicate. I suppose that if I were a benevolent controller of the language up and down the land, with a Gowers remit, I might do something about "TSBs"; but surely in our present system they must determine their own name. They have decided to keep the name Trustee Savings Banks Limited for reasons of continuity, and I cannot find very profound reasons why they should not do so.
The noble Lord, Lord Grimond, asked me a particular question about the Airdrie Savings Bank. It will, assuming it receives authorisation from the Bank of England, continue as at present. If it wants to amalgamate with another bank, it will be able to do so as other "1819" savings banks have done; for instance, the Annan Savings Bank, which merged with the Royal Bank of Scotland on 31st January this year. Airdrie will choose its own future; and should it ever wish to merge with TSB Scotland, it may of course do so.
As to the points made by the noble Lords, Lord Grimond and Lord Taylor of Gryfe, concerning local involvement and Scottish control, TSB Scotland will be a major and powerful financial institution well able to preserve its identity—and it will continue to make a powerful local impact. My honourable friend the Economic Secretary to the Treasury noted in another
1160
place that he had visited TSB Scotland in Edinburgh and saw no grounds whatsoever for fears that Scottish influence would wane.
I am very grateful to my noble friends Lord Ferrers and Lord Bruce-Gardyne for the very warm welcome they have given to this Bill. I am also profoundly grateful to the noble Earl, Lord Iddesleigh, with all his experience, for what he said. I look forward to a lively and interesting Committee stage on the Bill, and am glad that the House in general has given the Bill a fair passage.
I should just say, to the conundrum posed by the noble Lord, Lord Jacques, as to how the trustee savings banks could offer shares in such a way as to avoid a bonanza, that the proceeds of the issue will supplement the existing considerable assets of the TSB. The pricing of the issue will therefore take account of the fact that bank shares stand at a substantial discount to their net assets.
Lord Jacques: My Lords, if the noble Earl will give way, I may say that, no matter what the shareholders pay, they will get the present bank as a gift. One can make the price whatever one likes because they will part with their money individually but will retain collective ownership of that money.
The Earl of Gowrie: My Lords, I am tempted to suggest that the noble Lord, on behalf of shareholders and depositors, should not look a gift bank in the mouth. Nevertheless, perhaps we may argue that point further at Committee stage. I feel that the noble Lord is not taking sufficient account of the accumulated previous assets that have been mentioned.
I now see that I have a note relating to a point made to me earlier by the noble Lord, Lord Taylor of Gryfe, as to whether local shareholders should elect the local board. They can effectively run their company in that way if they wish, and the Bill leaves that to them as its own business. In the same way, they will have their own charitable activities—and (dare I say it?) their own deep desire to sponsor the arts in Britain, including in Scotland. My Lords, once again I beg to move that the Bill be now read a second time.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Local Government (Choice of Electoral Systems) Bill [H.L.]
7.36 p.m.
Lord Blake: My Lords, I beg to move that this Bill be now read a second time.
It is customary for a mover of a Bill to speak at some length, but I hope to be briefer than most on this occasion. We are, I am afraid, talking rather late into the evening—and noble Lords will appreciate that that is not my fault.
The Bill before your Lordships is the same (except for some drafting points) as that which was introduced by the noble Lord, Lord Harris of Greenwich, just over two years ago. It was narrowly defeated by what I may fairly describe as a wrecking amendment, by 68 votes to 60. I and some of my noble friends, and other noble Lords, believe it is time to test the opinion of your Lordships' House again.

1161
The object of the Bill is to permit district councils in England and Wales to opt for the single transferable vote as their mode of election. Clause 1 provides for this option and defines the single transferable vote. Clause 2 provides for the new electoral system to be introduced by resolution in any district council, and lays down the way in which the new electoral divisions will be drawn. Clause 3 gives the Secretary of State the necessary powers to make regulations; and Clause 4—the interpretive clause—interprets the expression "district council" to include London borough councils also.
The object of this Bill is a very small move towards greater democracy in local government. Democracy does not simply mean rule by the majority. That could be a sort of populist tyranny, and in some places it is. As I understand it—and I am sure your Lordships agree—democracy means certainly rule by the majority but also rule by the majority with due regard and due respect for the interests and opinions of minorities. But under the present first-past-the-post system (I will not call it FPP, in deference to the noble Lord, Lord Grimond) it is quite possible for a minority—indeed, quite a large one—to win no seats at all; as has happened, for example, with the Labour Party in Bournemouth and the Conservative Party in Islington. If so, no one on the council would be in a position to query or argue anything that it decides to do. There can be total party monopoly based on a tiny majority of the votes cast. That cannot be squared with any rational interpretation of democracy. It can happen, it has happened and will happen again if the rules remain as they are.
There are other oddities which can occur under the current system. How can it be called democracy when, as happened recently in a local authority, one Part—the Conservatives in this case—with 42 per cent. of the vote won 30 seats and the other party, Labour, with 36 per cent. of the vote won 33 seats? This actually occurred in Brent in 1982. There are other examples. It is true of course that since 1918 a similar situation has occurred three times at Westminster level. In 1929 and 1974 the Labour Party, with fewer votes, gained more seats than the Conservatives. In 1951 the converse happened. This brings me to an important point. I am a supporter of proportional representation for Parliament. It would be quite disingenuous of me to deny that. Some of your Lordships may have read the report of the Hansard Society Commission on Electoral Reform, of which I had the honour to be chairman, which was published in 1976. It came out in favour of a variety of proportional representation; not the one we are discussing today. Two of my noble friends, my noble friends Lord O'Neill of the Maine and Lord Holderness, were members.
The fact remains, however, that the arguments for proportional representation in local government are not the same as those for elections to another place. The local government case is in many respects a good deal stronger. There is nothing inconsistent or self-contradictory in any noble Lord voting for a Second Reading of this Bill but nevertheless feeling doubts or misgivings about proportional representation on a national level. There are two important differences. The first is that in local elections one is not voting for
1162
a Government or a Cabinet. The argument about strong versus weak government does not arise, or should not. Local authority councils are run by committees serviced by executives. They are intended to reflect the party composition of the electorate. Perhaps I should not say that. Perhaps I should not say that they are "intended" because it is impossible in the chaotic and confused history of local government legislation over the past century to say what, when and by whom anything was intended. What I mean is that the system makes sense only if the committees reflect different voices and different opinions from the community. A one-party council elected on little over half the votes cast is an absurdity.
The second difference between proportional representation for local as against national government is a matter of numbers. Numbers have to be considered in absolute terms, not percentage terms. The greatest parliamentary landslide in history was the defeat of the Labour Party in 1931. It won 30 per cent. of the votes cast, but it only had just over 50 seats out of 600—less than 10 per cent. That, of course, was very unfair. The party ought to have had about 180 seats. Nevertheless, the Opposition managed to do its duty which, as we all know, is to oppose, to scrutinise, argue, inquire and generally make trouble for the Government. The Labour Party had enough voices to do this and it is generally said and agreed that it did very well in spite of being in such a small minority. However, it is one thing for 50 out of 600 to do that in an assembly which sits for most of the week, apart from the customary periods of recess, and it is a very different matter for five people out of 60 to do the same kind of thing in a local government council. There is a certain numerical limit below which effective opposition is virtually impossible. Therefore, I do not think we need be influenced too much by the Westminster argument. It is valid but it is different.
I hope too that we can avoid the "thin end of the wedge" argument which I fear has some effect on some of my noble friends and no doubt on noble Lords in other quarters of the House. I hope that we can concentrate our minds on local government; on a system of election for Westminster there can be very divergent views even among those who favour proportional representation for local government. I am sure that the case for the latter is more powerful —indeed, it is very powerful—and although I favour it for national Government, too, I do not think that the two need go together. I quote an example. In Northern Ireland there is proportional representation—the single transferable vote—for the Assembly, for local government and for the European Parliament; but the first-past-the-post system for electing members to Westminster still prevails. Northern Ireland demonstrates that two of the possible objections to the Bill do not hold up to scrutiny. One objection which some people may raise—and I believe did raise when this was debated two years ago—is that it would be confusing and too complicated to have different systems of election for different bodies in the same country. That does not seem to be the case in Northern Ireland.
No one appears to have any difficulty in operating the single transferable vote and the first-past-the-post system at the same time. The other objection—the

1163
"thin end of the wedge" argument—that proportional representation in local government will somehow pave the way for the same thing in national Government, is also invalid. That of course is an objection which will only apply to those who are against proportional representation for Westminster, although they may have an open mind on local government. Noble Lords who take that view can take at least some measure of reassurance from Northern Ireland. Proportional representation in local government and the regional assembly has not led to any attack upon the Westminster system for the parliamentary constituencies. Experience of Northern Ireland has shown that the two systems can co-exist.
I briefly deal with some possible objections to the Bill. It was said of the Bill of the noble Lord, Lord Harris, that there was no point in having a permissive measure because the local authorities, where the worst abuses occurred, would be precisely those least likely to adopt it provisions. I very carefully considered the question of whether this Bill should be a mandatory Bill because I can see the strength of that argument; although it is hardly one that opponents of proportional representation in principle could logically use. I decided on a permissive measure because I believe that local authorities should, so far as possible, be responsible for local affairs and the way that local affairs are run. At the moment it is being argued by some of my noble friends, and certainly by noble Lords in other parties and on the Cross-Benches, that central Government is encroaching too much on local government; that Whitehall is overshadowing the town hall.
I do not want to go into the merits of such measures as rate capping. These may, in the peculiar circumstances of our times just now, be necessary. I certainly do not want to add to the encroachment, if that is the word, of central Government on local government. This is essentially a Bill to permit experiment. If, as I believe it will, proportional representation proves to be a success when it is tried by local authorities then the system will catch on of its own accord. There will be increasing pressure within district councils and borough councils to adopt something which gives a fair deal to minorities. People will stand for that particular cause in particular places. I think that it is better to act, in this instance at any rate, by example and persuasion rather than by fiat or command; and I believe that public opinion will in the end bring about the needed change if it is made possible through this Bill.
It might be asked, why confine the Bill to district councils? Why not extend it to county councils? Well, I considered that, and there would be quite a lot to be said for doing it, but my answer would be that it is better, perhaps, to try this experiment with authorities where the size of the newly created districts would not be too large, and also, more importantly, with authorities where there is already a tradition of voting for more than one candidate. If it is a success, I hope that in the course of time it will be extended to all types of local authority.
There were two years ago a number of objections raised which, in my view, do not have very much substance. My noble friend Lord Elton said that
1164
proportional representation might lead to the "exaltation" of minority groups. I think he cannot really have meant that. That cannot be correct, at any rate, except in the sense that minorities would do better than they now do by being fairly represented instead of unfairly represented. But they would not be exalted or exaggerated in any way. They would be getting their fair share of seats which they hitherto had not had; and that of course is the whole point of the Bill.
My noble friend Lord Beloff feared that extremists might get in. Well, extremists seem to have quite a lot of success in getting in under the present system, and so I am by no means sure that that is a very powerful argument. If in fact a section of the electorate is extreme, is it altogether reasonable to deny them representation?
I would just make this point. Under a system of the single transferable vote there is quite a substantial threshold effect—a percentage above which you are not going to have a chance of getting in at all; and the percentage is well above the levels which have ever been achieved by the National Front, Trotskyists or Communists.
On one matter which was criticised in the debate two years ago I have rather more sympathy, and that is the question of whether, if this Bill achieves a Second Reading, it should be referred to a Select Committee. I can see the case for this, but on balance I believe that it would be better to let the Bill take its ordinary course. A Select Committee is more suitable when there are important factual matters to determine. I think that the facts about this are pretty well known. I think that this is in the end a matter for political judgment, and I am not clear that a Select Committee would really be of any great help in this particular case.
This is a modest, permissive measure. I believe that it would make elections more fair. I am sure that it would raise voter participation. It has done so wherever it has been tried, for the simple reason that the voter does not feel that his vote is wasted and a whole lot more voters are in a position to make their vote effective. There is considerable support, I think, for this experiment among at any rate some of my noble friends, among noble Lords on the Cross-Benches and the Bench of Bishops and among supporters of the Alliance. I very much hope that your Lordships will support the Second Reading. My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(Lord Blake.)
7.53 p.m.
Lord Evans of Claughton: My Lords, it gives me very great pleasure to follow the noble Lord, Lord Blake, in supporting the Second Reading of his Bill. I suppose that it will not come entirely as a surprise to your Lordships to find someone who sits on these Benches supporting the concept of proportional representation. In one of the debates some years ago when I raised the subject myself I think that I was accused of having a neurotic obsession with the subject. Of course if one has suffered under the present system as some of us have in the past, it is hardly surprising that we have an obsession about the subject.

1165
But I do not wish to pursue that particular aspect. I do not regard proportional representation as a panacea for every ill; it is not. It is an amelioration of some of the conditions of our democratic system.
During the debate when I raised this subject some considerable number of years ago both the noble Lord, Lord Boyd-Carpenter and the Minister, the noble Lord, Lord Elton, described my proposal for proportional representation in local government as some fancy form of franchise, which had the benefit of alliteration and nothing else. It had that wonderful thing that the British are so good at—implying in some way that we British are superior with our old-fashioned, first-past-the-post system and it is only inferior foreigners who tinker with other systems of fancy forms of franchise.
In fact, it is our present form of first past the post in this country that is the fancy form of franchise now. The widely accepted form of franchise in nearly every European democracy—in nearly every country where there is not a simple two-party system, as there is in the United States and one or two other countries—is to have a form in one way or another of proportional representation. I am sure that those of your Lordships who have been to the European Parliament and met European politicians have been impressed by their total amazement at the way in which we persist in this outdated system of election.
As the noble Lord, Lord Blake, said—and it was a very effective point, I think—this has been introduced in Northern Ireland for the Assembly and for the European elections and of course it has been in operation in the Republic of Ireland for some considerable time. So in fact we are surrounded by countries that go in for fancy forms of franchise. They do not seem to me to be any the worse for it. Very often they seem to be very much better governed in the respect of the voice of the people being properly heard than is the case in this country.
People suggest to me—and coming from Merseyside, as I do, it is often suggested to me—that it is too complicated for the ordinary man in the street to have to vote 1, 2, 3, 4, 5, rather than "X". Quite frankly, anyone who can do the pools successfully, which are very frequently done in many parts of the country, can surely cope with a system where one uses a 1, 2, 3, rather than an "X" form of filling in one's ballot paper.
I concede that the counting of the votes is longer and more complex. In fact, I would go so far as to confess that I have never worked out how it could be done. But that is a matter for the people who are employed to do it and who do it very effectively, as we have seen. I do not know whether any of your Lordships watched the last election in the Republic of Ireland, but it was done very effectively, efficiently and quickly. There was no problem at all in that sense. I think that we should get some of these ideas out of our minds about this complex, fancy form of franchise. It is not. It is a straightforward, perfectly acceptable form of franchise for the British Isles. We supported that system in your Lordships' House, you may remember, in the abortive legislation for the Scottish and Welsh Parliaments.
It will be argued, I expect, during the debate that the circumstances in Northern Ireland are special and unusual and that is why there is proportional
1166
representation there. May I suggest that these days the circumstances in the rest of the United Kingdom are unusual in that sense? In my youth there was a two-party system in this country. I think that approximately 98 per cent. of the people who bothered to vote voted Conservative or Labour and we Liberals and others for whom the remaining 2 per cent. voted got a pretty harsh time of it.
But the circumstances are totally different at the moment. Anyone who cares to look at opinion polls—and if someone does not like opinion polls, he can look at election results at both local and national level—has to concede that there is a very strong third force in this country indeed. Therefore the circumstances are very different now from what they were in the 1940s and 1950s. I think therefore that, since the circumstances have changed, and changed permanently, in my submission, we should be giving serious consideration to, and carrying out changes in, legislation about how people should vote. That is the first point—that in this country the two-party system is over.
The second point is that we are in a period of unprecedented confrontation between central Government and local government. If your Lordships care to look at Clauses 86 and 93 of the proposed Local Government Bill, which your Lordships will shortly be considering here, you will see that the centralisation involved in the reserve powers that Ministers are proposing to take to themselves will make that position even more absurd and even more difficult and that there will be even more causes of conflict.
It seems to me, and I believe that it seems to the electorate at large, that it is an absurd situation that, because of the electoral system, this country should have inflicted upon it an absurdly inflated majority at Westminster (at present with the Conservative Party) in conflict with a series of absurdly inflated majorities for the Labour Party in many of the local authorities. That is a natural ground and basis for serious and unending conflict. I know that this will be denied, and frequently it is, but it is very firmly my belief that a very great deal of this legislation which is at present going through Parliament, emasculating local government, is brought about entirely because of the conflict that exists, and has been going on for some time, between the Prime Minister, Mr. Livingstone and other local government leaders.
In the last discussion we had on the previous Bill, it was interesting that my noble friend Lord Harris of Greenwich pointed out that he was a member of, I think he said, Harlow Council, where there was no opposition; there was just the Labour Party. The noble Lord, Lord Blake, has rightly drawn attention to the evils that can come out of that kind of situation. In the past, I have been a councillor for nearly a quarter of a century. I was on an authority where there was a tiny Conservative minority and an even tinier Liberal minority. Because local government operates through committees, it is impossible to organise a constructive opposition in local government if you are unrepresented on perhaps three-quarters of the committees which make decisions in local authorities. The council meeting itself is largely a farce for reasons that are quite obvious: because of the strong whipping of the majority party and because the members of the

1167
minority parties have not the sources of information to know why decisions have been come to if they are not members of the committees which make those decisions.
I can hardly let a speech that I make in your Lordships' House pass without mentioning the problems of the city of Liverpool. I feel I have to mention them. There is there now a first-past-the-post Labour majority, which is excluding the opposition parties, whether they be Liberal or Conservative, from almost every say in any decision that is made about the government of that city, much to its disadvantage. This goes on time and time again.
In the debate we had some years ago, I thought it was very significant that the noble Duke, the Duke of Portland, pointed out that if we had had a PR system in the GLC election last time round, we should not be having the problems that many of your Lordships have in contemplating the activities of Mr. Livingstone and his friends because there would not have been, and should not be under a fair system, a Labour majority on the Greater London Council.
It seems to me that the present Government have been busily and effectively, if I may say so, reforming our outdated 19th century trade union laws and many of our other laws which may have been right and proper for the conditions that existed in this country in the 19th century. Why do they not now see that we need to turn our attentions to our 19th century first-past-the-post system of elections? Such a system might have been perfectly appropriate in a Whig-Tory confrontation in constituencies with small numbers of people. Why do the Government not realise that one of the things which is holding back development in this country is our persistent obsession with the first-past-the-post system?
As the noble Lord, Lord Blake, has rightly said, local government is perhaps one of the ideal ways of doing this. I think PR would be very good in Westminster elections; I think it would be excellent in European elections, but I think its suitability for local government elections is absolutely unrivalled, for the reason which the noble Lord has given.
I conclude my remarks by saying that I am not supporting Lord Blake's Bill because I think the present system is unfair to minority parties. It patently is, but that is not my reason for supporting it. My reason for supporting it is that I believe that the present system is unfair to the people of this country and unfair to any basic principle of modern democracy.
People are always criticising the fact that, depending on where they happen to live, only 15, 30 or 40 per cent. of the electorate bother to vote in local elections. I think it is remarkable that even that number bother to vote, because it is such an appalling lottery and perhaps the majority of people who go out to vote will never be represented by the person they wanted as their local councillor.
The present system distorts the wishes of the electorate in very many local authority areas in this country. To me it is a great sadness that also, in my belief, the present system makes the party whip system far too strong. I believe very strongly that if we had a
1168
PR system it would encourage more people of independent mind to come in. It would give greater opportunities to people from ethnic minorities. I am told, and I believe this to be the case, that it would encourage a greater number of women to stand as candidates and to be elected and that you would have more representative local government with less obsession with the power of the whip and more concern for the wishes of the people.
As your Lordships know, this experiment was tried in Sligo, in Ireland, before it became a republic. It was such a success there that it spread throughout the rest of the country. I support the Bill very warmly because I believe that once an experiment has been permitted to take place in this country in one of our district councils, that concept will then spread like wildfire and we shall have local government more representative and certainly more democratic. I very strongly support the Bill.
8.8 p.m.
The Lord Bishop of Derby: My Lords, all of us in this House are criticised from time to time for being remote from the ordinary world. One value of the televising of our proceedings has been the unforced provision of the information that among us there is considerable practical experience and marked professionalism. We bishops have many direct contacts with people of all ranks in the communities of our dioceses. We learn much indirectly through the experience of our parochial clergymen. Like all of your Lordships, we have the right to vote in local government elections and we are well aware of the effects on us and our people of the policies of district councils. We have a right to speak in this particular matter because of our knowledge as well as because of our membership of this House.
Spiritual peers are also members ex officio of the General Synod of the Church of England, which, however limited in some ways, is a fair cross-section of ordinary people in this country, both laymen and laywomen, as well as clergymen. On two occasions, the first in 1976 and the second in 1983, the General Synod has carried, with large majorities, the motion:
"That this Synod believes the time has come for a change in the present parliamentary voting system and urges all political parties to adopt a preferential system of proportional representation as a policy commitment for future public elections".
That motion was passed in 1983 by 251 votes to 61. This is not a situation in which the bishops or the Church or the General Synod can be accused of being trendy "Lefties" or trendy Conservatives, since both the larger political parties are opposed to proportional representation. Rather, the Church is helping to set the trend. It has used a single transferable vote system in Convocation and General Synod elections for over 60 years, which is no small period of time. We have had wide experience of it. We see every reason, in the light of this experience, not to change it.
So much has it been valued that during the time of the General Synod's existence the system of elections to our committees has been changed, with general agreement, to the system of the single transferable vote. The voluntary use of it is the arrangement for diocesan and deanery elections. This is the principle of choice in local elections expressed in this Bill. We

1169
support the system in the light of experience. As an archdeacon I presided over elections by proportional representation, and my experience in that way adds to my conviction about its fairness.
It is fairness in local government that this Bill seeks to provide. As an illustration of unfairness, let me refer to figures given by a responsible layman in the General Synod debate in November 1983. He lives in the borough of Islington. He said:
"In the 1978 election in our borough, 65 per cent. of the votes were cast for Labour, and they gained 100 per cent. of the seats on the council. In 1982, their share of the votes fell from 65 per cent. to 51 per cent. and they gained 98 per cent. of the seats on the council".
A situation like that is not an expression of democracy: it is government by an elected dictatorship. The Synod speaker went on to say:
"People feel alienated and disillusioned with the system and they cease to bother to vote".
That state of affairs is widespread. It does not exist merely in Islington. My wife and I know that in our area there is no point in our voting because our votes will never count. Hers might do so in a parliamentary election, but never in a local government one. If people live in an area where there can be swings between one of the larger parties and the other there are alternate dictatorships with abrupt changes of policy, and still many people are disfranchised. That fact exposes the canker in our present system, which is the introduction into local politics of the national party system. Local affairs, local needs, local opportunities are made subject to ideologies. It is now impossible in most places for any genuinely independent candidate to be elected. All representatives vote as they are told to vote.
This, of course, strengthens the attitude of confrontation rather than consensus. It is the latter that is required if the needs of whole communities are to be met. At the present time, they are made subject to the desires of those who wish to retain or gain power for their own nostrums. This is one clear view from the grass roots. It is not a matter that we must consider in theory: we must relate it to the circumstances in which we live. I welcome the initiative of the noble Lord, Lord Blake, in introducing the Bill. It is a worthwhile step towards the recovery of-democracy in local affairs.
8.13 p.m.
Lord Houghton of Sowerby: My Lords, if the television cameras were in the Chamber at the present time, your Lordships' House would offer a strange appearance to the viewers, with the Alliance Benches packed, the Labour Benches empty and a fairly representative attendance of noble Lords on other sides of the House. I make no claim therefore to be speaking on behalf of any of my noble friends. My noble friend Lord Mishcon will have the unenviable task of replying on behalf of his noble friends who are not here.
I shall not detain the House for more than a minute or two. The list of noble Lords wishing to take part in the debate is so impressive and my views on this subject should be so well known that I need not detain the House to listen to them again. I shall, however, say this. Since the last occasion upon which we discussed
1170
a Bill of this kind, ballots have become the "in" word in our democratic system—ballots for this, ballots for that. Indeed, we have had legislation since then to make ballots for the election of trade union officers and executive committees obligatory. We have had a law to make a re-run of ballots on the inclusion in trade union rules of political objects compulsory every 10 years. There has never been more talk of ballots. The strike that ends tomorrow has been largely concentrated on the failure of a trade union to hold a ballot in accordance with its rules. Therefore, if the ballot is to become such a common instrument of the expression of democratic opinion, I think that we should study much more closely what kind of ballots we are to have.
Mostly the institutions that must now hold ballots by law are left to decide for themselves what method of election they choose. It is about time that we began an experiment in an alternative form of election and that we did so where it is probably more suitable than anywhere else. We can give an option for local authorities, whereas we cannot give an option for parliamentary constituencies. At least, I think that it would be difficult to give options to parliamentary constituencies in the same way that one can give options to local authorities. A pilot scheme is not really valuable because it will be a mock scheme. So we want a pilot scheme that is part of the reality of elections to the body chosen for the experiment. It would be very interesting indeed to see what happened in those local authorities where the alternative system was chosen. We should learn a great deal from it. I am sure that a number of local authorities would choose to have it. This is perhaps the least venturesome, certainly the least reckless, of all experiments. It is one that would probably give the best indication of how the public responded to it.
In passing, I dismiss completely the idea that electors these days are baffled by ballot papers. As was stated a few minutes ago, they are not baffled by football pools. Many are not baffled by income tax forms. In any case, it would be possible to revert to the practice that existed when universal suffrage was first introduced into parliamentary elections in a by-election at Pontefract in 1874. On that occasion there was a register for illiterates. An illiterate going into the polling station was able to take a friend with him to advise him on how to fill out his ballot paper. While that advice was being given and while the ballot paper was being filled in, everyone else, except the recording clerks was cleared out of the polling station. There were well over 100 illiterates in the Pontefract by-election in 1874. We could have an electoral counsellor, suitably in uniform, wearing a badge or otherwise identified, who would be available for any elector who found it difficult to fill up the ballot paper and needed a little help. One can laugh that objection out of court.
We therefore have to come to the main issue of how we are going to get a representative democracy. I believe that we are running into increasing danger for the stability of our parliamentary and local government democratic system if we continue the existing system of election. The real mischief in Britain today is that so many people are in power who have it without adequate representation behind them. The

1171
reason Governments become unpopular so soon after being elected is that they have not got the electoral strength behind them to begin with. This threat of extremes by Governments and local authorities that may come in by a swing of the pendulum, that can take them from a minority position to a majority position of considerable strength, presents dangers. It is better to have harmonious, if not adventurous, local government which is well supported by the electors than to have one which is extremely controversial and is running serious risk of exceeding its mandate. Therefore I sincerely hope that your Lordships will support this Bill.
I have before me the result of a by-election held the other day in my former constituency. There were three candidates. They had seven recounts to find out who had won a local government by-election. The Liberal candidate came first, with 1,198 votes; the Labour candidate came second, with 1,193 votes; and the Conservative candidate came third, with 594 votes: seven recounts to find who should be elected by five votes under the existing system, with more votes against the successful candidate than for him! A single transferable vote would have settled that by-election in a matter of minutes after the first count and would have given the holder of the office of councillor greater assurance of his merits and his legitimate right to be there. So let us this time give this Bill a Second Reading.
8.21 p.m.
Lord Fraser of Kilmorack: My Lords, I should like to thank my noble friend Lord Blake for the brevity, clarity and care with which he introduced this Bill. The Bill, as he indicated, is a re-run, with a few drafting amendments and one or two changes of intention of a minor sort, of the Bill introduced some two years ago by the noble Lord, Lord Harris of Greenwich, and which was debated in this House on 18th February 1983. Some noble Lords may consider that the re-run is perhaps a bit premature. I think so, in one respect to which I shall refer later. But I do not think that is really very important, and it is not a real objection to having the re-run. After all, we live in a rapidly changing world, and in such circumstances a change of mind, if people wish to make it, can sometimes be as necessary and as salutary as a change of linen. Therefore I have no objection to the Bill in its present form coming here again.
However, I should point out straight away that, as most noble Lords who know me and who attended that debate before will know already, in regard to the electoral system at Westminster I remain an ardent supporter of the present first-past-the-post system. I shall not go into the arguments on that tonight, because the hour is late and the arguments are well known and are not immediately relevant to the Bill we are discussing. On this, I differ from my noble friend Lord Blake, but the Conservative Party is a broad church and both of us have managed to sustain our position in it over the past 20 years during which we have known each other.
In looking at this Bill—the revised Bill—the problem before us is whether it is as relevant, less relevant, or more relevant than it was when we discussed it two years ago; certainly that is my view,
1172
from the way I am looking at it. As I hope I made clear two years ago in my contribution to the debate on the Bill of the noble Lord, Lord Harris of Greenwich, while I am a stern supporter of the present first-past-the-post system at Westminster and would be prepared to argue about that for a long period, I have no fundamental objection in principle to some form of preferential or proportional voting being applied to non-sovereign assemblies such as, for example, the European Parliament, or, for that matter, local government here in Britain.
Indeed, in the light of developments in local government over the two years since we discussed Lord Harris's Bill, I can now see some advantage in having different electoral systems in this country for Westminster and for local government. The introduction of a suitable proportional system in local government—I keep open the sort of system—at an appropriate time—and that is another question that I keep open—on a mandatory but not an enabling basis might indeed help to mitigate some of the abuses in certain councils to which the noble Lord, Lord Harris, dramatically drew attention two years ago. Moreover, a clear attempt to make the electoral systems at Westminster and in local government purposely different would get over the thin-end-of-the-wedge argument which has been used in the past, with some validity, in relation to Bills of the kind that your Lordships' House is discussing this evening.
The changes which have been made in the Bill seem to me on the whole an improvement. I have no objection to them, and in any case we can think about them if we come to a Committee stage. I am particularly glad that the idea of sending this Bill, if it gets a Second Reading (as I presume it will) to a Select Committee has been dropped. I shall not go into the reasons: there are plenty of reasons which have been canvassed before.
Finally, I should like to say that it seems to me that, as Napoleon said:
"Time is man's great art".
I am very doubtful that now is the right time to introduce this sort of legislation. In my view, the proponents of the Bill are not quite timely, if I may put it that way. I believe now, as I did two years ago, that a Bill of this sort is still premature and that this is no time to impose further experiments on local government. If ever there was a moment when local government in England and Wales should be left for a period of years at least to sort out its real and pressing problems of finance and administration, it seems to me to be now. In my view, it would be pointless and counter-productive in the long run to inflict further tangential and unnecessary electoral experiments upon local government at the present time. Therefore, although I have no disagreement in principle with this Bill and would not under any circumstances oppose the Second Reading—in any case it would not be customary—I have my doubts about the timing, and it may be that another re-run in due course would be a good idea.
8.27 p.m.
Lord Chelwood: My Lords, my noble friend Lord Fraser of Kilmorack has made a very interesting

1173
speech. He always speaks very well in this Chamber, and I feel very encouraged that someone of his undoubted intelligence and good judgment is not opposed in principle to this Bill—I rather gathered from his speech two years ago that he was, but I may have been wrong—and that his real grounds of opposition are that it is premature and perhaps will have a better chance if it is introduced in a few years' time. I find that encouraging.
I am a strong supporter of the Bill—that will come as no surprise to noble Lords—because I think that it would permit a system that would enable minority parties and minority views to be represented in a way that broadly reflected their electoral support. That in turn would lead to real and better debates in council chambers; and there is plenty of room for improvement. The arguments which have been mustered against the Bill this time and two years ago, and, indeed, in another place, where permission to introduce a broadly similar Bill was refused, are to me not very impressive. If I may, I shall briefly—I am going to speak briefly—paraphrase them; I hope I shall do it fairly.
We are told that it would let in the extremists and the "nuts". Well, why not? They would not be there for very long. If "flat earthers" or "Screaming Lord Sutchs" or "Trots" can muster enough support to get in under the STV system, I say "Good luck to them". I should prefer them to be letting off steam in the council chamber than sapping and undermining authority outside.
People are inclined to ask—though this is sometimes the unvoiced question—"What will my party gain from changing the system?" I think that in some ways that may be the real root of opposition to a measure like this—the real root of opposition to this sort of change. However, I think that it is quite the wrong question to ask. The right question is: Would this measure, or one like it, improve local government by making it more representative, more responsive and more responsible? In my opinion it would do all three, which one could call the "three Rs".
We are told—and this argument has been briefly dealt with and I shall be even briefer—that such a measure is too complicated and too hard for people to understand. I believe that that is rather insulting to the intelligence of the British electorate. I reckon that if the Maltese and the Irish can understand it, we ought to be able to as well. We are also told that it would be untidy because the system would not be uniform across the country. I believe that there is some truth in that; it would be a little untidy, but I have never thought that tidiness for its own sake has very much merit.
However, I accept the criticism that authorities dominated by one party are the least likely to change the system, even were they permitted to do so by this measure getting onto the statute book. I am the first to admit that the first time round they would do nothing about it at all. But what about the second time round or the third time round? Let us try to give the voters a chance to assert themselves, and I believe they would do so. Like my noble friend who moved the Second Reading in such a felicitous way, I believe that a measure such as this would prove to be a success where it was adopted and that it would catch on.
1174
Then we are told that it would be the thin end of the PR wedge. This is sometimes the argument of those whose minds seem shut to constitutional change of any kind. It is the argument of those who think that the present electoral system cannot be improved upon at all, which is a very negative argument. It is the argument of those who are fearful that in local government a PR system might be both popular and successful, which was one of the points so well made by my noble friend Lord Blake. I agree with everything that my noble friend said, and I certainly agree that, if this Bill were to become law, it would not be a precedent for national elections to another place or, for that matter, even for the European Parliament, where we are the only country without any element of PR at all. However, whether or not it is a precedent, what is wrong with a good precedent anyway?
Therefore, I think that this is a very good Bill. In my view, it would be very difficult indeed to devise a worse system for district council elections than the present one. If the Bill were passed, it would mean that for the first time in local government and district council elections a clear majority of votes cast would actually count. At the moment a majority of votes cast does not count. The present system, which I regard as a thoroughly bad one, means apathy. On average across the country only one in three of local electors bothers to vote. Often as few as only one in six or seven bothers to vote, and that is obviously very bad. The present system distorts the voters' wishes and this has been made very clear in all the speeches that have been made. All too often the present system means permanent and predictable domination of an authority by one party, against which any challenge is unlikely to succeed, and that is a very depressing thought for those who do not agree with that party's views. Indeed, all too often the present system means that the winner takes all and quite often that second past the post gets control of the authority concerned, and not first past the post. There are many examples of that in this land.
I promised to be brief and I have been reasonably brief. I regard this measure as a modest and sensible proposal. I regard it as an experiment, if you like to call it that, in constitutional reform. I look on it as a hesitant step forward in the constitutional field. I believe that under successive Governments too much power has been concentrated in Whitehall and local authorities have been required to dance to the Whitehall tune. How very refreshing that local electors should be able to choose the sytem by which they elect their own representatives.
I fear that this measure is hardly likely to become law this Session; in fact, I would not mind betting on it. But perhaps I may say politely and with affection for my old friends in another place that a system that is good enough for electing the Chairman of the 1922 Committee ought to be good enough for electing councillors to district councils. Therefore, I congratulate my noble friend Lord Blake most warmly on the way in which he introduced the Bill and I wish the Bill well.
8.35 p.m.
Lord Simon of Glaisdale: My Lords, I, too, wish to congratulate the noble Lord, Lord Blake, on

1175
introducing a Bill which I consider to be of central importance, because we are concerned with the machinery by which our system of representative democracy operates. It seems to me to be a great pity that Government business has taken precedence so that this Bill came on for discussion only after 7.30 this evening. One could not help remembering with some cynicism that when the Bill of the noble Lord, Lord Harris of Greenwich, was discussed on a Friday mysteriously 15 Ministers were working in this Palace and not in their own offices, and it was those 15 Ministers who secured the defeat of the noble Lord's Bill. I am bound to say that there is quite a noticeable number of Ministers about this evening, and I sincerely hope that the Government are not getting the idea that a Lord in Waiting means more than its honorific title indicates.
As I have said, the Bill is an important measure. It is an important one intrinsically because it is concerned with the machinery of representative democracy. But it is also important because of a word which we have heard more than once this evening from the noble Lord, Lord Evans of Claughton, and from the right reverend Prelate the Bishop of Derby—the word "unfairness". Is it not terrible that 25 per cent. of our fellow countrymen are profoundly convinced that the present electoral system treats them unfairly? I suppose that a large number of others, such as those who were mentioned by the right reverend Prelate, agree with them profoundly.
Therefore, when the noble Lord, Lord Fraser, says that this Bill is untimely and is premature, I venture to ask your Lordships: Can it be untimely, can it be premature to correct a fundamental unfairness? Even if the system worked with perfect smoothness, would it not be right to correct this unfairness? This Bill deals with franchise. It therefore deals with liberty and, after all, that is the meaning of "franchise". Even if the word "franchise" is used in the narrow sense that is used by constitutional lawyers, it still denotes a means by which citizens can exercise their liberty—the means by which they can control the decisions that affect their lives.
Your Lordships will remember the story of the happy marriage, and the wife was asked to what she ascribed the felicity. She said, "Well, I make the small decisions, and I leave the large decisions to my husband". She was asked, "What are the small decisions?" She said, "Well, where we live; how many children we shall have; where they shall be educated. They are the small decisions". The interlocutor then said, "Well, what are the large decisions?" She immediately replied, "Well, things like the size of the public sector borrowing requirement; the strategic defence initiative; or the common agricultural policy. I leave those to my husband".
That is how our system of democracy, our system of liberty, works. We try to vouchsafe as many decisions as possible to the individual citizen, but some cannot be taken by him individually. Some of these big ones, such as I have just mentioned, are taken by representatives. But because those representatives are answerable to their electorate, the citizen can still exert an influence even over those big matters which affect his destiny.
1176
Then at another level, the level with which your Lordships are concerned this evening, there are the decisions which are made in local government. When your Lordships discussed the Bill of the noble Lord, Lord Harris, the noble Lord, Lord Elton, was inclined to discount the significance of it. He said that it was a matter between councillor and ward in local government. But the essential point is that council decisions, local government decisions, are taken collectively. Therefore, unless there is a proper, fair system of representation which can ensure that the citizen can affect those decisions, even if they are about drains, highway cleansing, and that kind of thing, then he is denied his democratic rights; he is denied his liberty; he is denied his influence over the decisions which affect him.
The noble Lord, Lord Blake, used words which were virtually the same as I heard falling from Lord Attlee in another place. He said, as I remember, that democracy does not mean rule by the majority; it means rule by the majority with deference to the interests of the minority. I mentioned that on the last occasion, and I have no hesitation in repeating it, because it is a profound political truth. But our present system does not ensure that the majority need at all consider the interests, the wishes, the well-being of the minority, and frequently it does not do so.
It is an additional misfortune, your Lordships may think, that this debate has come on so late, because on the last occasion we had a graphic account, an authoritative account, by the noble Lord, Lord Harris, of the wickednesses—one cannot say less—which go on in some local authorities. That was borne out by the noble Lord, Lord Houghton of Sowerby, speaking not only with his matchless knowledge, but with the authority of his membership of the Salmon Royal Commission on Standards in Public Life. It is in these one-party, or practically one-party, authorities where the greatest mischiefs occur.
The noble Lord, Lord Mishcon, is going to reply to this debate on behalf of his party, I imagine. He has great experience of local government. As your Lordships will have learned, he is a superb debater, and it is not to be thought that he will condone the kind of mischiefs which were described last time and which are written down in Hansard, and which are indeed commmon knowledge. But I hope he will explain, if he chooses to, how otherwise than by such a measure as this those kind of mischiefs can be averted.
I want to say only a word about the argument on the "thin end of the wedge". I would ask those who take the Conservative Whip to consider just two matters. The first is the way that Mr. Scargill was received at the Labour Party conference, and secondly, combined with that, the opinion poll which we read over the weekend. I would ask those on the Labour Benches to consider in turn whether they do not prefer what went on under the Lib-Lab pact to what they choose, with opprobrium, to call "Thatcherism".
Apart from that I desire to say only this about the "thin end of the wedge". It was a great politician who was also a great constitutional scientist who said that the British constitution is full of the thin ends of wedges, that the good sense of the community refrains from driving them home. Therefore, I trust that none

1177
of your Lordships will be deterred from voting for this Bill because it might be said to involve proportional representation at national level. It seems to me that that was disposed of by the attitude of the noble Lord, Lord Fraser.
There are three particular reasons why the system of the single alternative vote is peculiarly suited for district councils and London Borough councils. The first is that it is in those that, as I have said, we were shown the greatest mischiefs occur. The second is that, as the noble Lord, Lord Chelwood, said, it is an area where we can experience how this works before moving on to other constitutional spheres. The third is that the present system involves a tyranny: the tyranny of often a small majority over a large minority.
My Lords, for myself I should like to see this measure amended in Committee so that it is no longer permissive only but is made mandatory; because it seems to me that the very worst authorities will be the slowest to apply it. The other thing is that I should myself like to see a commencement date not linked to the volition of the Secretary of State, because the Secretary of State is likely to come from one of the two major parties and it is, after all, idle to pretend that they do not find the present system extremely comfortable to their own interests. Subject to that, I shall unhesitatingly follow the noble Lord, Lord Blake, into the Division Lobby.
8.50 p.m.
Lord Moyne: My Lords I shall be very brief, as suits the lateness of the hour and also because the noble Lord, Lord Blake, with much better powers of persuasion than I have, has, in such detail and with such eloquence, put forward the points to support the Bill. I simply want to stand up and be counted in favour of it. The thin-end-of-the-wedge argument has been thoroughly disposed of; the thin end of the wedge has been entirely chipped away. The argument is that there would be no strong decisions in the Commons. But, for local elections, consensus is the first consideration, While deploring, like many of my generation, the growth of party politics in local government, the greater the balance of parties, the greater the consensus and the less political bias. I doubt whether dissatisfaction with such bodies as the GLC would have been so great if there had been within their ranks a more equal balance of parties and a closer consensus of opinion.
As a Conservative, I am a cautious reformer. I do not agree with the odd Conservatives who say that they are Radicals. They are like Humpty Dumpty when he said that words had whatever meaning he chose they should have. I see Conservative policy as one of wanting above all to conserve what is good and to improve it pragmatically by trial and error. That seems to be exactly what this Bill is designed to do. It gives freedom to local authorities to move in a new direction at a time when many of us have seen their freedom reduced in one way or another. It gives the opportunity to minority interests to make themselves felt; it gives freedom to experiment. It takes none away. I hope that I shall not put the parties opposite against us if I say that the Bill is a good conservative measure of reform.
Lord Henderson of Brompton: My Lords, at this time of the evening and at this stage in the debate, it is very difficult to say anything new. But what I can say new in congratulating the noble Lord, Lord Blake, on introducing this Bill today is that this House has not, as some people who are ignorant of the House might think, a bad record on electoral reform. I have found an example exactly 205 years ago of the Duke of Richmond trying, not unsuccessfully, to interest this House in proposals—and I quote from the Record (which was then not "Official"):
"to procure a more equal representation".
That is pretty remarkable in 1780. He chose a very bad time to do it. It was in the middle of the Gordon Riots, and Peers were having their wigs and clothes torn off them as they came into the House. There was no electoral reform, I need hardly say, for 52 years. Nevertheless, that is not bad for this House of Parliament. It means to say that this House was not always on the side of what is supposed to be its electoral interests, the rotten boroughs, and so on.
The noble Lord, Lord Houghton of Sowerby, mentioned the television cameras. I, myself, am glad they are not here today. Otherwise, they might give the erroneous impression that the Alliance has somehow packed the Benches next to the Throne with Lords Spiritual as well as Lord Temporal.
I think that it is quite right that the Bill should be introduced by a Private Member who is a supporter of one of the two major political parties. The truth is, as I think everyone must recognise, that the two major political parties cannot abide the thought of proportional representation. It is anathema to them. So, with great respect to the spokesmen of two political parties in this House—and they know that I have great respect for them—one must seriously discount most of what they say, speaking as they do for parties which have either political power or the reversion of political power; and they act in collusion to retain that power or the reversion of that power. That is why I ask the House to discount what either of those remarkable spokesman in this House will say.
To be entirely fair, I would also ask the House similarly to discount the views expressed by the official Alliance spokesmen, because they are interested in change in their direction. May I give an instance of the bias which can creep into their utterances when speaking for their political parties? The noble Lord, Lord Evans of Claughton, said,—and perhaps I am paraphrasing him—words to the effect that things are now quite different because there is a third force in the land and that in the old days that was not so. Times have changed. Well, my Lords, it may be true that there is a third political force but I do not think that the electorate has changed. The electorate in the old days merely had the choice of voting for one of two parties. They now have a choice of voting for—what shall we say—one of three or one of four. That does not indicate that the electorate has changed; and I think that all political parties should remember that the majority of the voters in this country do not belong to any political party—none at all! And it is those who do not belong to any political party whom the parties have to try to persuade to vote for them.
I would say that the electorate no longer wishes to be treated like children offered an "either/or" option.

1179
They are far more sophisticated, they are far more grown up, than they were before—partly due to better education, partly due to television coming into their homes and to the quality of political argument advanced on "the box". As I say, they are no longer content to be treated like children with an "either/or" option. I would say, particularly in the local context, that they would now expect to be given a rather more sophisticated choice which matches their political sophistication.
So, my Lords, let me just say two things which are both related to local government. This has been touched on before, not least by the right reverend Prelate the Bishop of Derby. Those who live in a constituency which is dominated by one party or the other of the two main political parties are, to all intents and purposes, disfranchised if they do not happen to belong to the dominant party in that constituency. This must be bad for those who are disfranchised, because their vote never has any value; but it is also bad, it must be bad, for the dominant party in such a constituency, because they do not feel the need to respond to those whom they know to be in a permanent minority in that constituency.
I have deliberately taken the most extreme example of someone living in that kind of constituency—as it were, Bournemouth or Newcastle Central—in the old days, but the same is true to a certain extent in constituencies which are slightly more volatile, and there the only choice you have is to indulge, if you are clever enough, in some kind of tactical voting other than the straight "either/or" option. So I would say that the two dominant political parties should now realise that voters do not belong to either of those two parties. I think that the Alliance Party should realise that they do not belong to that party either. With great respect to the noble Lord, Lord Evans, I hope he will agree with that. That ought to make everyone politically conscious go for some more politically sophisticated form of voting which matches the political sophistication of the electorate.
My second reason is also entirely devoted to local government. There was the Commission on the Constitution, and noble Lords will remember that the commission was very properly concerned with the relationship between local and central government. Though I agree generally with the views expressed by the Government and their supporters—notably by the noble Lord, Lord Broxbourne—that the issues raised by the local government legislation of the last Session and this Session are not "constitutional", if I can put the word in inverted commas, in the sense that what has been given by statute can be modified by statute, the issues nevertheless are "constitutional" in the broad sense, as understood by the Royal Commission, in that this legislation does alter the balance between central and local government. I do not like to see this centripetal tendency, which I see (in shorthand) as a function of the militant tendency in local government. Here, I must just say it was extraordinary to hear the noble Lord, Lord Beloff—himself an extremist—expressing the fear that any kind of proportional representation would spawn extremists in local government. I would say exactly the opposite.
I should like to see STV introduced into local government, even in the tentative way introduced by
1180
the Bill of the noble Lord, Lord Blake, for the two reasons that it would give greater real choice to the local government elector, whose vote would then have some value, and that that choice is far more likely to contribute to the election of the less militantly tendentious of the local councillors, who would be likely to concentrate more on good local and answerable administration—and I very much prefer the word "administration" to the word "government" in this context—and less on national politicking.
9.3 p.m.
Lord O'Neill of the Maine: My Lords, I will be very brief, partly because of the lateness of the hour and partly because I have the tail-end of a cold. I should like, as usual, to support the noble Lord, Lord Blake, under whose chairmanship I had the honour to serve, first of all, on the Hansard Committee some nine years ago and then on other committees, and also as a member of the Conservative Association for Electoral Reform. In my view, proportional representation in some form will come to this country before the end of the century. Let us hope it will not come too late.
If I may say a word about Northern Ireland, perhaps I am the only Member of your Lordships' House who has voted under the STV system in Northern Ireland. Preparations were made for those elections. They were very well done; and I remember that one of the slogans was, "As simple as one-two-three", Of course, that is a fact; and I congratulate the noble Viscount, Lord Whitelaw, for have stood up to the extremists in Northern Ireland when he was head of the Northern Ireland Office—those who opposed the introduction of STV on the grounds that it would hurt the Unionist Party.
Prior to the last election there was much more support for our views in the City, as the noble Lord, Lord Houghton, and I, who serve on the National Committee for Electoral Reform, will know. Since the last election finances have dried up to a large extent, and if anybody in the City gets hold of what I have just been saving I hope they will realise that this financial support is needed more today than it ever was. People should not rest on their laurels and say, "Now we have a large majority, a Conservative Government, we need not worry any more about proportional representation; everything is all right". In fact, as I say, it is more essential than ever that we should have financial support for the national committee.
Lastly, I should just like to say that one or two noble Lords have suggested that this Bill should be mandatory. It seems to me that politics is the art of the possible, and if there is to be any possibility of getting this Bill made into legislation, then it must be permissive. It could not be mandatory. One would never get the Conservative Parts, in power at the moment, to support a mandatory measure of this kind, as I see it. I think that my noble friend Lord Blake was absolutely right to make it permissive, and I wish him good luck. I hope I have not detained your Lordships for too long, and I hope very much that we shall have an uninterrupted Second Reading.
9.7 p.m.
Lord Harris of Greenwich: My Lords, only two years ago, as the noble Lord, Lord Blake, said in his

1181
introductory speech this afternoon, we debated a remarkably similar Bill to this one. We failed then to secure a Second Reading by a mere eight votes. Tonight I hope that we shall be a great deal more successful. I must say, in winding up this debate so far as my noble friends are concerned, that this has been a very unusual debate because we have not yet heard a single Member of the House who is a root-and-branch opponent of this Bill stand up and make a speech against it. The one Member of your Lordships' House who spoke against this Bill on the last occasion—and indeed he was one of the tellers against it—was the noble Lord, Lord Fraser. In his speech today, he indicated quite a substantial change in his own position—one which, as one who has a very high respect for the noble Lord, I very much welcome.
What struck me about the debate that we had two years ago was the extraordinary degree of complacency which was demonstrated by many of those who opposed the Bill on that occasion. It is tempting to remind the House of what they said on that occasion and to compare it with what has happened in local government in England and Wales in the two years since then. But quite apart from that, there was an extraordinary amount of intellectual confusion in one case. I speak before the noble Lord, Lord Elton, and therefore he will have the opportunity of dealing with this point because I am referring to his own speech on that occasion.
At col. 487 of the Official Report of 18th February 1983, the noble Lord expressed his commitment to what I would describe as the confrontational approach to local government; the two great armies drawn up against one another in opposing lines, waiting for the trumpet call to signal the beginning of the battle. The noble Lord said then—and for all I know this will be the basis of the speech that he delivers this evening—
"The voter at a local government election usually has a choice … between one set of policies which he knows will have one effect on the rates and services, and another set of policies which will affect them rather differently".
A few moments later he added:
"At present, as I have said, voters tend to pick a team for something which in general terms rather resembles a team game".
Yet in the very next column of Hansard the noble Lord is reported as saying precisely the opposite. The two great opposing armies had miraculously dispersed. He said:
"We do not think primarily of party politics when we think about our local councillor, I hope. We think of him because we want something done about the dustbins, the street lighting or our children's education. Our concerns are not general and national: they are intimate and local".
No doubt the noble Lord, Lord Elton, will be good enough to tell us when he speaks in a few moments which of these two entirely contradictory arguments tie is putting before the House this evening.
For myself, I prefer by quite a substantial margin the second of his arguments. When we elect members of a local authority we are not, as the noble Lord, Lord Blake, said at the beginning of this debate, electing a Government. We are choosing local representatives to deal with local problems. It seems to me highly desirable that this being so we should base our local elections on an electoral system that encourages
1182
compromise and tolerance and not the endless, pitiless, damaging confrontations that we have seen between a number of local authorities and central Government.
That brings me to another of the noble Lord's arguments in 1983, and this, I suspect, we shall not hear deployed quite so vigorously this evening. Apart from a few side-swipes at a number of local Labour councils, the noble Lord, Lord Elton, seemed extremely pleased with our system of local government. At col. 489 of Hansard he said that it had "a few warts and wrinkles"; but apart from that apparently everything was absolutely fine. The House may find it a bit difficult to relate those comfortable cosy words with what has happened since, with the proposed abolition of the Greater London Council and the metropolitan counties and a system of central Government intervention in the affairs of local government, including rate capping, which makes us the most highly centralised democracy in the Western world.
What we are debating tonight is not just a Bill concerning proportional representation in some local elections. It is whether there is to be a serious prospect of moving towards more independent and vigorous local government. We all know that there have been substantial abuses practised by a number of local authorities. Rights have been denied to oppositions. Sometimes they have been deliberately, and in the most calculated way, excluded from important committees of councils. There has been a denial of free speech. Increasingly, senior officers have been appointed on the basis of their presumed political views and others have been forced out of their jobs to make way for political placemen. Large sums of money have been voted for organisations believed to be sympathetic to the majority party and, in a number of cases, local authorities have practised reckless expenditure policies which have inflicted severe hardship on both residents and small businessmen. It will be said that only a small minority of local authorities is involved in this kind of conduct. That is true; but that minority is growing and so are the number of abuses. We all know that to be true.
The Government's response has been twofold. First, they have announced that they are proposing to set up a committee to study the type of abuses that have taken place. As has been made clear from these Benches, we very much welcome that, but the committee will no doubt take a long time to report. Nevertheless, it would clearly be wrong to anticipate at the moment what we believe that committee will recommend. Secondly, as a result of the behaviour of local authorities of the kind that I have described, the Government have intervened more directly in the affairs of local authorities than has ever previously been done in the history of local government in England and Wales.
This has provoked deep resentment throughout local government, as the House as a whole is aware. It has provoked resentment in the shire counties, which are largely controlled by Conservative majorities, in the leafy suburbs and certainly in the inner cities. Where will this end? On Thursday of this week a number of local authorities which have been rate capped will deliberately refuse to set a rate. The resolve

1183
of a number of them will no doubt crumble in the weeks to come; but a handful, which are spoiling for a fight with the Government, may well refuse to back down.
What will happen then? The law will ultimately be enforced, and quite right too. No one on these Benches—and I am sure in the House as a whole—will support defiance of the law of this country. There will then be disqualification of councillors—I shed no tears for them—and ultimately commissioners will be appointed by Ministers to administer the affairs of the local authorities concerned, no doubt with some refusal by some local authority workers to co-operate with these commissioners. Yet many of the councils which are contemplating taking action of this sort do not even begin to have majority support from their own electorates.
Let us look at the case of Lambeth. At the last local authority elections in Lambeth, which were very nearly a plebiscite as to whether you agreed with Mr. Ted Knight or you did not, one third of the voters of Lambeth indicated by voting for Mr. Knight and his colleagues that they agreed with him; two thirds of the people of Lambeth voted against Mr. Knight. But who has the majority in Lambeth? Mr. Knight, and by a significant majority. All I am saying to the House is that it seems to me quite astonishing, first, that local authorities can behave with such a remarkable degree of arrogance; and, secondly, that we should tolerate an electoral system which gives people such as Mr. Knight the opportunity to behave in this fashion.
I say this as an afterthought. Twelve months ago I decided that it was a long time since I had been to a meeting of a local authority, having been a member myself, and so I attended a meeting of the Lambeth local authority. I am bound to say that after two and a half hours of listening to the debate at their then rate-fixing meeting, I was astonished at the character of the behaviour of the members of that local authority. There was in the most direct fashion a denial of free speech of people who dissented from the majority opinion on that local authority which I have not seen in my political lifetime. Unfortunately, this type of behaviour is now becoming increasingly common throughout this minority, as it certainly is at the moment, of local authorities in this country which are in fact controlled by people such a Mr. Knight.
There is a very similar sitution in Southwark. There the present majority party had a larger vote than Mr. Knight but it was certainly a substantial minority of the electorate. Yet they are contemplating taking on Thursday of this week exactly the kind of action I have suggested. Then, as the right reverend Prelate the Bishop of Derby remarked a few moment ago, we have the case of Islington, where 51 per cent. of the electorate voted Labour at the last local authority elections; 51 Labour councillors were returned; the 49 per cent. who voted either for the Conservative Party or the Alliance were represented by a single councillor.
That local authority has, as we all know, behaved in a quite intolerable fashion ever since. Knowing what has been taking place in local authorities of this kind, are we really going to tolerate an electoral system which permits this degree of abuse of power? I would
1184
not suggest for a moment that this Bill if enacted will transform the situation. As the noble Lord, Lord Blake, pointed out, this is an enabling Bill and is not mandatory. However, I believe that it points the way to a new, more democratic framework for local government. In doing so, it will offer a message of hope to many communities in this country.
9.20 p.m.
Lord Mishcon: My Lords, with his usual consummate charm, the noble Lord, Lord Henderson of Brompton, gave me encouragement by saying, before I had the privilege of addressing your Lordships, that your Lordships should discount anything that I said. I must pay tribute to his fairness, because he said exactly the same of the noble Lord the Minister, who is to follow me. I admire your Lordships for having stayed in the Chamber in order to hear either of us speak, having received that mandatory instruction to discount anything we had to say.
I have listened with the utmost attention to what has been said in a most important debate on a most important Private Member's Bill. I should have thought that any of us who loves democracy and who has a respect for local government would have been unanimous in decrying many of the practices about which complaints have been made. We are told that there are some local authorities who behave very badly. The noble Lord, Lord Harris, said he had attended one such council—an authority where, if my memory serves me correctly, the majority is not a large one at all. The noble Lord was referring to Lambeth, and said he was disgusted at the way in which certain members of that council were howled down. Presumably they were members of the opposition, which had almost the same number of members as the majority party there. He found that behaviour extremely bad.
I hope that the noble Lord, Lord Harris, will recall that there is another House of Parliament. When he listens to the deliberations there, he may find that the same kind of conduct is likely to occur. I, with him, decry such behaviour in any democratic assembly—the refusal of people to allow others to be heard. But that has nothing to do with proportional representation.
We have heard that in other places local councils behave with arrogance because of their majority. The same arrogance will occur if there is a majority with proportional representation. What we must do is examine for a moment something other than that for which one party has striven to achieve. I admire them for their principles, but they did not always stand for the principle in question. When they had a majority and were in power, it was not one of the planks of the Liberal Party to ask others to agree to proportional representation. But one always takes it for granted that in politics—and possibly this is an aspect which those of us who are mere amateurs in the game find a little disillusioning—self-interest does seem to play a part in motives and propaganda.
I do not want to indulge in self-interest tonight: I want to examine the very evils we have been talking about. The first thing that is wrong with local government is that power has been taken away from local government. That is what leads to a lack of

1185
interest in local government elections. That is also what leads to the election of lesser people in local government. That is the first thing that is wrong.
I was brought up in local government—a sphere of political life which I loved for over 20 years. One was able to do things, and not just legislate. One could build houses; one could talk about schools; and one saw that the schools were built, and could watch them being built. The same applied to parks and other things for which local government was supposed to be responsible. I can remember that well. There is no difference between any of us, I should have thought, who have indulged in local government and its elections over the years. My guide and mentor—and I proudly say so—was one Herbert Morrison. Herbert Morrison said to me, not just at one LCC election but at more than one when he and I stood side by side in South London constituencies addressing what were very full audiences in those days, "I dare not say it from the platform, but I hope we get a workable majority. I hope we do not get an overwhelming majority". How wise he was! How wise was a Conservative politician who said the same in the last election, but who was reprimanded for sayng it! I say precisely the same of any Government, whether it be Labour, Tory or, with the dream of proportional representation, one day the Alliance Party.
I say, as a democrat, that I do not like overwhelming majorities; but that is not what we are talking about.
Lord Simon of Glaisdale: My Lords, is that not what we are talking about? Does the noble Lord really think one is more likely to have an overwhelming majority under the present system rather than under a system of proportional representation?
Lord Mishcon: My Lords, the noble and learned Lord, as one would expect of him, has made a perfectly fair point. What does happen with proportional representation, whether it be with national Governments or local government, is that one gets an inconclusive result. In many ways that is as bad as having an overwhelming majority. That has been the experience with national Governments and local government. If you put before an electorate, and certainly if you put before the chief officers of local authorities, the option of having a workable majority or an inconclusive election result when a firm policy cannot be carried out and when there is alteration from one meeting to another depending on the number of councillors who attend, you will receive the reply that an inconclusive majority is the worst of all results.
Lord Evans of Claughton: My Lords, will the noble Lord the Minister give way?
Noble Lords: Oh!
Lord Evans of Claughton: My Lords, the noble Lord was making such a ministerial speech! Would the noble Lord not agree that if he bothered to consult his Labour friends in Liverpool, and their officers, they might come up with an entirely different answer and would prefer almost anything rather than the Labour majority that now exists?
Lord Mishcon: My Lords, it is rather difficult to answer an intervention of that kind, which, if I may say so, is just the sort of political remark one would except in the very council chamber to which the noble Lord, Lord Harris, objected.
I return to my theme. I can understand this debate having been conducted on the basis that politics ought to be taken completely out of local government. I have heard that argument, and it can be a very strong one. Then, of course, you get the people we were talking about before, who are worried about the lack of local amenities and who take a completely independent point of view. I have heard that argument. The argument against it is that the one way in which you can govern is not by having a whole series of independent people: one must have groupings. The independent people would form themselves into groups in order to carry out policies. There are also, of course, the compromises and bargains, with, "I'll vote for you on this matter if you will vote for me on the other matter".
If I may turn to this Bill, as I said, it does not deal with the evils—and they are evils—that have been talked about. I should like to see, as I imagine would other noble Lords, too, stronger local government. I should like to see the independence of local government back again, and I have referred to that. But let us look at this Bill. Let us consider what would happen with a permissive system—and this is not an original thought; I know that it was echoed in the debate of 18th February 1983. I do not claim originality for it.
If these are the evils which we are supposed to overcome and these are the examples, how do we get over them with a Bill which is permissive? Is the local authority that we are talking about going to pass a measure which says. "We will now have proportional representation which will of course reduce our majority"? Is that going to happen? It is not practical. Is it sensible, having got it permissive, to have in this country a system of local government which varies from one area to another, and in which the man who moves from Lambeth to another borough and changes his residence finds that there is an entirely different system?
Are we to get rid of something which people regard as very healthy—the annual resignation of one third of the members of a council, so that they are judged year by year and not every three or four years? We should have to get rid of that if we passed this Bill. Is it right that, having decided in one local authority to adopt that system, it stays with that local authority which cannot get rid of it for 12 years at the very minimum? Is that right? Is that sensible? It is a pretty long time for an experiment. It is not that anybody on any Bench of your Lordships' House does not want to take a close look at the dying local government of this country to see whether it cannot be revived, but in all the circumstances this Bill will not do it.
9.32 p.m.
Lord Elton: My Lords, I have listened to your Lordships' speeches on this Bill with close attention and with great respect. As far as the contribution of my noble friend Lord Blake is concerned, this is hardly to be wondered at. He occupies a position in relation to

1187
me which puts him, in a number of ways, at a considerable advantage. He is a senior and respected member of my own political party and its historian, and the biographer of one of its most illustrious leaders. He is the provost of the college of which my late father was dean; and, as he was a don at Oxford when I was a mere undergraduate, his shadow falls, as it were, across my past. I suppose I could add that as he is editor of the Dictionary of National Biography he has at least the option of publishing his opinion of me in the future and casting it over me once again. By then of course I should be a spectator from another world.
I note also what I think is the best turn out of bishops almost that I have yet seen in this House in a debate on this kind of matter, adding their silent support to the solitary voice of the right reverend Prelate the Bishop of Derby, under the benign eye of the most revered Primate. I therefore consider that if I put a foot wrong, even my position in the next world is somewhat in doubt.
Moreover, my noble friend's formidable grasp of this subject, which he again displayed when moving the Second Reading, was already established when he chaired the Hansard Society's commission for electoral reform 10 years ago. Your Lordships will realise therefore that common prudence, as well as respect and courtesy, require me to deal carefully with anything he puts before me, and that I would disagree with him only of necessity and then only in the most restrained of terms.
My noble fried puts before your Lordships a matter too close to the wellsprings of democracy for us to look at it with anything but the greatest detachment and impartiality. I turn first to the electoral system that we have and then to what my noble friend proposes and the results we could expect from the change.
The system we have may not be perfect but it is simple, it is familiar and it is well understood. The residents of any district or borough are divided into groups according to where they live and each group is asked to choose for itself one or more representatives from all those who offer themselves for election. There are 8,577 of these groups or wards altogether in England alone and only five of them return more than three members to the council. The question asked of the voter is simple in every case. It is "Who do you want to represent you on the council?"
The simplicity of the system is reflected in the size of the wards. In this context I agree with my noble friend, I think it was Lord O'Neill of the Maine, that numbers have to be considered in absolute terms. The average number of electors in the metropolitan districts is 10,410. If that seems rather large, it is because they are the largest groups that we have for this purpose. In Greater London (excluding the City) the average is smaller, it is 6,784. In the non-metropolitan districts it is only 3,153 and that is healthily compact. The question of scale is important. If local democracy is to work there must be a mutual regard between the electors and their representatives. The voters need to know the councillors' intentions and conduct and the councillors need to know the voters' hopes and worries. Strength lies in intimacy rather than in scope. The present system does permit local councillors to
1188
become familiar with the intensely local issues that are the concern of their electors and which alone it lies within their grasp to act upon.
At this point, I break off to recall that the noble Lord, Lord Harris of Greenwich, kindly repeated some of what I think were the rather better parts of a speech I made over two years ago on the same subject and asked me to elaborate on it. I am always grateful to noble Lords when they pay me the courtesy and consideration of waiting until I have sat down before they raise questions on my speeches, but I do not think I have ever known courtesy carried to the extent of 24 months before. I am deeply grateful to him. As I recall, I said in the first extract which he quoted that electors voted for programmes. It is possible that the noble Lord thought that I was referring to national political programmes but if he looks again at the record he will find that I was not. In the second extract, I said that those programmes related to local and not to national issues. So I do not see a contradiction in what I said. It just seems that, as I fear is my habit, I said it twice,
As I think we are agreed that these are local issues that we are talking about, I am a little concerned to see that under Clause 2(3) of his Bill, my noble friend is proposing to create new electoral areas by amalgamating existing wards into groups of which every single one, even the smallest, will be bigger than all but five of the wards we now have. Eight thousand five hundred and seventy-two of our well-known and even quite well-loved existing wards return only three members or fewer. All the proposed new groupings, even the smallest, would return four members or more, and the maximum proposed is not less than nine.
The effect of that would be to increase the average size of the electorates in non-metropolitan areas from roughly 3,000 to between 6,000 and 9,000; and in metropolitan areas from roughly ten and a half thousand to no less than between 20,000 and 30,000. If strength does lie, as we believe it to lie, in intimacy, this must be a very much weaker system than what we now have. That system is not very complicated. It did not take me many minutes to describe it. The electors make their choice, they cast their votes and the canditates receiving the most votes win.
Your Lordships will readily accept that the proposed new system is not quite so simple as that. It is described with an elegant simplicity of language on the face of the Bill but the simplicity of language reveals, or perhaps I should say conceals, a complexity of operation that becomes deeper as one looks at it more closely although it is not fully defined, and, as the noble Lord, Lord Mishcon—whose very effective support I have real pleasure in welcoming this evening—pointed out, much if it is left to the Secretary of State, who would not perhaps regard the task with relish.
These elections are things that have to be understood and discussed not only in the upper common rooms of universities but also in the downstairs room of the village hall and the back snug of the Bull and Bush. So what is this thing that my noble friend would like to see discussed and understood in the thousands and tens of thousands of such meeting places in which such matters actually are

1189
threshed out? And who should we get to explain the new mechanism? Certainly not the noble Lord, Lord Evans of Claughton, who has put it on the record that although he has been a councillor for a quarter of a century, he is quite incapable of understanding the way the votes are counted—a suggestion that my noble friend Lord Chelwood said would be insulting if applied to the general electorate.
Lord Evans of Claughton: Will the noble Lord give way—the noble Lord, the Minister? I am correct this time, although you cannot tell because they are interchangeable on this occasion. I said that I did not understand not how votes are counted because they are counted very effectively in my case and I have always won. May I say that I did not understand how the votes come out and the preferences are selected during a PR election. That is an honesty that I hope every Member of your Lordships' House might also admit to.
Lord Elton: My Lords, I am sorry that if, in the attempt to save words and therefore time at this late hour, I did not make myself clear; but that is precisely what I meant. The noble Lord is an experienced local councillor; however, he is proposing to introduce a system but he says he does not understand the workings of it.
Noble Lords: No!
Lord Elton: My Lords, I have no wish to make too much of this point. I withdraw if the noble Lord did not say that. I shall look at the record. I apologise to the noble Lord.
I return to the task of explaining how the system works. What does the promoter, the proportionalist, have to say? He does not have to say, "Just give your vote to the person or people you like best and whoever gets the most votes wins". I suppose that he has to say, "You have a vote and there is a piece of paper with 12 names on it". I say 12 names because I want to be fair to my noble friend. I have therefore taken the smallest single transferable vote electoral area that the Bill allows which is a four-seater area and I have assumed that there are only three main contending parties and no fringe candidates. If I were not to put the best case for my noble friend but instead looked at a nine-seater single transferable vote electoral area, which his Bill provides for, and if, moreover, I was looking not all that far ahead to the time when the marriage between the Liberal and the Social Democratic parties may have been dissolved so that there were four main parties contending and if the ecologists, women's lib and the National Front entered the list together with the ratepayers who after all do these things, even with only one candidate each—none of which is in the least unlikely—the piece of paper in my hand in the snug would have nearer to 40 names on it than 12.
Here we are with a piece of paper containing 12 names. We say to the voter, "Here are these 12 names. You have only one vote. But we don't want you to choose just one person. You can choose as many as you like. You write the numbers, 1 against the one you like best, 2 against the one you like next best, and so on". My noble friend Lord O'Neill of the Maine says
1190
that it is as simple as 1, 2, 3 but the Bill does not say that. The Bill leaves it open to have as many preferences as the voter wishes. So you might be electing someone not with your first, second, third, fourth, or fifth preference, but with your sixth, seventh, eighth or ninth preference. In that case, I wonder to what extent and how far down the list the voter would go with his preferences before he felt that his vote did not count.
Lord Tordoff: My Lords, will the noble Lord give way?
Lord Elton: My Lords, it may be that other noble Lords wish to interrupt. I wonder whether, with the clock in mind, I should ration it to the different Benches. The noble Lord is sitting alongside the last interrupter. I am sure that he will forgive me if I try to exercise a certain proportionality in this also.
At this point in my noble friend's shoes, I should be ordering the second round of bitter and considering how to explain what happened to the surplus of votes acquired by a successful candidate. Under the Bill, the surplus votes can be allocated to the voter's next preferred candidate but it prudently leaves the precise arrangements for deciding which votes to select as surplus to the Secretary of State to put in regulations. I cannot at the moment say what those might be. I can, however, say that much of the process described in the Bill is a great deal more complex than what we now have and that electors would not see the direct and simple connection between their action and its electoral results that they are used to and we believe to be healthy. So, if the strength of the system lies in part, again as we believe it to do, in its simplicity, this system must be very much weaker than what we have now. I pass over the question of the three seats a year in a three-year cycle, because the noble Lord, Lord Mishcon, has already pointed out that it is removed by the Bill.
My first conclusion about the Bill is that it would obscure the visible causal link between the counting of votes and the electing of representatives. It would cease to be seen as something direct and pragmatic, and become something obscure and mysterious —something, I was almost tempted to say, which might be signalled more by white smoke from the town hall chimney than by the town clerk appearing on the town hall steps. That air of remoteness is intensified by the considerable increase in the size of the electorate in any STV area using the system. In my home borough, I am at present represented by three councillors for a ward with roughly 8,000 electors. None of them, as it happens, had my vote, but I know who they are and they would not have had my umpteenth preference had it been available. But, as it is a small patch, I know them, and they know what are our local concerns. Under what is now proposed I should, I suppose, be one not of 8,000 but of 24,000 electors, and I should be represented not by three but by nine possibly conflicting voices on the council.
The element of conflict is important, because the whole purpose of this Bill—and it is a purpose that is avowed and acknowledged—is to get minority groups represented on the council. My Lords, I am a minority group. Conservative Peers are a minority group almost

1191
everywhere—even, on occasion, in this Chamber, if I recall correctly—and I am not actually sure that I altogether welcome the prospect offered by this Bill in this respect. My reluctance to snap up this offered benefit rests on two considerations. First, it renders the outcome of an election even more uncertain than it now is. At present we know that in the great majority of cases the real contest is between two or three large blocks of interest represented by candidates from the two or three major political parties. If I vote for a candidate I vote for a programme worked out to reflect not merely his individual objectives but those of the party to which be belongs. If the blues win, I get a blue programme; if the reds win, I get a red programme. The intention of the Bill, however, is to see that nobody wins, in that sense, at all. I think I am right—
Lord Campbell of Croy: My Lords, will my noble friend give way? I wonder whether I may intervene for a moment from this side of the House. My noble friend is now making a point which the noble Lord on the Opposition Front Bench made; that is, that it is better to have a policy adopted than have something which is uncertain. If, in a certain area, the majority of the electorate happen to want a middle-of-the-road policy, are they not entitled to have it, even if it is inconvenient for the chief executive or the previous chairman of the council?
Noble Lords: Hear, hear!
Lord Elton: My Lords, the noble Lord attracts obvious sympathy for what he says from the Benches which the noble Lord, Lord Henderson of Brompton, said should be discounted because of their interest in the case, it is true he discounted as well my views and those of the Opposition Front Bench, which left the Cross-Benches and the right reverend Prelates in a very strong position.
Lord Reigate: And some of us, too, my Lords.
Lord Elton: My Lords, the fact is that there is a choice between having visible programmes and electing people to horse-trade about what the programmes should be. What you then get is not necessarily a blend. My noble friend describes it as a middle-of-the-road policy. It is the best deal that can be got, cobbled together from the agreement to abstain or vote preferentially in the council chamber, or, indeed, in the caucus room, on a whole series of options, which can produce something quite unrecognisable from any party's programme and any individual programme. Therefore, I feel that what the noble Lord is asking us to adopt is something uncertain in its results and unclear in its operations.
I do not wish to detain your Lordships much longer. I think I should mention the contribution by the right reverend Prelate the Bishop of Derby, because he commended this Bill to your Lordships on, among other things, the strength of something which none of the rest of your Lordships referred to; that is, the debate in the General Synod of the Church of England in 1983, in which eight people spoke. There was a convincing majority for the proportional representation
1192
system. I do not think that I would counsel your Lordships to argue from the General Synod's experience of proportional representation as to its desirability for local government. It is quite clear that in national and local government there is a group of people in power with a known policy. Your Lordships know what our policy is; your Lordships know the policy of the noble Lord, Lord Mishcon. But as I understand it, that is not the case in the General Synod. That is no form of criticism of the Church at all because the General Synod is there for a totally different purpose. It is not for managing the affairs of a community in secular matters.
Your Lordships raised a number of other matters which I shall pass over. If your Lordships are owed an answer, I shall readily write. I shall say only that the Bill is permissive, not mandatory, and that is put forward very much by my noble friend Lord O'Neill of the Maine and others as an advantage. However, the noble Lord, Lord Mishcon, pointed out that it must also be a disadvantage. The choice would lie with existing councils elected by the existing system.
One might have expected that the existing councils would have been consulted through their association. That was not the case on the last occasion we debated a Bill on this matter and it has not been the case on this occasion. However, we have made that inquiry on each occasion and on each occasion have found that the association opposed the legislation, and its members were most unlikely therefore to take up the opportunity it seeks to offer them. I am sure that they would absolutely understand and support the view of my noble friend Lord Fraser of Kilmorack that this is not the time to add to the stresses and changes with which local government is already having to contend. Her Majesty's Government share their lack of enthusiasm.
We do not of course condone any of the abuses referred to by the noble and learned Lord, Lord Simon of Glaisdale, or by the noble Lord, Lord Harris of Greenwich. However, we doubt if what is now proposed would put an end to them, and we think that it would substitute a different colour of the same difficulty. At no stage have I relied upon the argument that this might be the thin end of the wedge because it did not seem to me to have been necessary.
We shall not seek to deny my noble friend his Second Reading, but I much regret that, high as is the esteem in which I hold him, I can offer him no assistance from this Bench either now or at a later stage.
9.53 p.m.
Lord Blake: My Lords, it is late and I do not propose to reply at any great length. I believe that your Lordships have heard a great deal of argument and it is all fairly familiar. I should like to begin by thanking the many noble Lords who have taken part in the debate—and I even thank my noble friend Lord Elton and the noble Lord, Lord Mishcon, for their most interesting contributions. Apart from them of course almost every noble Lord who spoke, with the possible exception of my noble friend Lord Fraser of Kilmorack, who was a little more doubtful, was in favour of the Bill. I think that that is a matter of some significance.

1193
Perhaps I may very briefly deal first with what the noble Lord, Lord Mishcon, said. As we all know, the noble Lord is a masterly debater. He thought that this Bill would not be a cure for all the ills of local government. He conceded that there are a great many ills in the current system of local government; that there are many very bad features of it, some of which the noble Lord, Lord Harris of Greenwich, outlined and some of which I mentioned.
I would agree with the noble Lord, Lord Mishcon; I would not expect a Bill of this sort suddenly to transform the whole situation and all the corrupt malpractices of local government overnight. It would be most unlikely that it would do so. I would say that it is a step in the right direction. I quite agree with the point about it being permissive and not mandatory, and I gave the reasons, and other noble Lords have given the reasons, why we consider that it is better to go slowly and to hope that a permissive measure will persuade other authorities to adopt a system of proportional representation. I am aware of that difficulty. I do not believe that the Bill can possibly do any harm. I think it will do some good.
The authorities where the worst abuses take place are the ones, as I think the noble Lord, Lord Mishcon, said, where you have big majorities. He made quite a point about his deploring the size of the phenomenon of very large majorities. This Bill, if adopted, would do something to prevent that phenomenon. There would be a more even balance. It would correspond more closely to the actual political composition of the electorate.
The noble Lord, Lord Mishcon, also said that there would be something absurd about voting under a different system in different places. I think I have got him right on that. It is sometimes known as the "patchwork quilt argument", which I have heard. I rather like a patchwork quilt. It looks rather pretty and rather nice. In any case, I cannot see why this should be a difficulty. I cannot see that there should be any inherent diffficulty in adopting a different system of voting in, say, Islington or Bournemouth, or wherever it might be. I cannot understand what difficulty arises over that, though it is always said to be a problem.
1194
This brings me to my noble friend Lord Elton. I should like to thank him for his civil remarks about me to begin with, though I do not know that I thank him very much for what he said at the end. A message was conveyed to me that my noble friends on the Front Bench would regard this Bill with malevolent neutrality. I thought that the noble Lord, Lord Elton, fully justified that description in his speech.
I want to make two points here. The noble Lord made a great deal of fuss about the terrible problems of explaining the single transferable vote at the local pub. Well, there is no need to do it. The answer is that the single transferable vote is a perfectly simple system for those who do the voting. It may be complicated to work out how it is done. It may set a bit more of a headache for the returning officer. But the fact is that what you put down is as simple as one, two, three, although I agree you go to larger numbers, five, six, seven, eight and nine.
I cannot think that this is a major problem. You put the people down in your order of preference. You have not got to put the whole lot down anyway. You can put down just two, or one, if you want to. It is a simple system. It is no more difficult from the point of view of the voter than the first-past-the-post system. The noble Lord was making an absolute dog's breakfast out of this. I think that some of his remarks verged upon the absurd.
There seemed to be some reproach implied to myself and to other noble Lords who are sympathetic to this Bill, in that we had not consulted the local associations. The noble Lord, Lord Elton, evidently has. He has discovered that the local associations would not be in favour of this measure. Well, they would not, would they? That is all I can say to that. I hope that the House will give this Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at one minute before ten o'clock.

  PRISONS: MEDICAL DOCUMENTATION REVIEW
  PRISONS: MEDICAL DOCUMENTATION REVIEW
  YUGOSLAV CITIZENS: UK RESIDENCE
  YUGOSLAV CITIZENS: UK RESIDENCE
  FALSE AND MISLEADING PRICE INFORMATION
  FALSE AND MISLEADING PRICE INFORMATION
  HAMPTON COURT PALACE
  HAMPTON COURT PALACE
  SCOTTISH OFFICE STAFF: ACADEMIC QUALIFICATIONS
  SCOTTISH OFFICE STAFF: ACADEMIC QUALIFICATIONS
  EDUCATION COSTS
  EDUCATION COSTS
  EC MEDICAL SERVICES: TREATMENT UNDER RECIPROCAL AGREEMENT
  EC MEDICAL SERVICES: TREATMENT UNDER RECIPROCAL AGREEMENT